UK - Opportunities still exist in emerging markets debt despite the recent dip in performance, Axa Investment Managers believes.
The fund manager said that while Turkish, Ecuadorian and Brazilian government bonds had contributed to the poor performance of the asset class as a whole, bonds issued by Russia, Kazakhstan and Colombia were outperforming.
Axa IM head of emerging market debt Nadine Tremollieres said: “We favour Russia for its outstanding macro economic picture – the fiscal and current account balances are positive for the first time in many years thanks to rising oil prices and responsible spending policies.”
She said Kazakhstan’s economy was similar to Russia’s, and perhaps even stronger, while Colombia and Bulgaria’s economies had also improved thanks to political changes.
But while these nations were outperforming, Tremollieres said political uncertainty in Turkey, Brazil and Ecuador would continue to stifle the performance of their bonds.
She added: “We think the AKP (Justice and Development Party) has done a great job in stabilising the economy in Turkey. However, we feel spreads are too tight in regard of the massive stock of debt and the EU accession will be tougher than market expectations.
“In Brazil, although the economy is improving, the political situation is deteriorating and we fear the government could lean to more populist policies. In Ecuador the situation is very tense – there is strong opposition to responsible economic policies.”
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