LatinFinance - May/June 2015 - 18

investors are taking a closer look at Mexico's
triple-B issuers: companies that offer solid
credit metrics at better value, and which
have scope for upgrade. Some managers
are happy to dabble in high-yield bonds,
too - although the low number of Mexican
non-investment grade companies tapping
the market limits activity here.
Some investors say they are taking a
cautious approach toward debt from Chile
and Peru because of the economies' heavy
dependence on mining exports. Colombia,
despite the importance of oil revenues to its
economy, has found favor, though.
As in Mexico, Colombia's currency has
depreciated against the dollar. That has
cushioned the effects of the oil price slump
for some parts of the economy. The Andean
country has also found strong appetite in
the new issues market from bond buyers: it
raised $1.5 billion when it sold a 2045 bond
in January. At just over 5%, the note boasted
the lowest yield the sovereign has ever paid
to borrow at such a long maturity.
A string of Colombian corporates and

financial institutions followed soon after,
also finding strong interest from investors.
Global forces
Despite the highlights, a number of issues
are undermining the attractiveness of
Latin American assets. As Chinese growth
has slowed, from 10.4% in 2010 to the
7% estimated for this year, the country's
demand for minerals, grains and protein
is also expanding more slowly. That has hit
Latin America as a whole, and commodities
exporters are particularly feeling the pinch.
"For many of the countries in the region,
the fundamental deterioration accelerated
in the second half of 2014 with a 50% oil
price slump," says BlackRock's Trigo Paz.
"The subsequent fall in fiscal revenues for
the oil exporters was so sharp and fast that
today in some countries policy makers are
still trying to figure out what the national
accounts look like."
Other international factors, such as
political instability in Ukraine, also kept
emerging market bond buyers on their toes

Reference points
LatAm Debt Benchmarks
Net returns (%)
1-year

3-year

5-year

10-year

JP Morgan EMBI +

4.53

4

6.64

8.02

JP Morgan EMBI Global

4.08

4.38

6.83

8.04

Lipper Emerging Market Hard
Currency

-0.16

2.41

4.93

6.97

Lipper Emerging Market Local
Currency

-9.98

-3.58

-

-

Source: Lipper. Data to 31 March 2015

in 2014.
"The name of the game last year
was two-fold. It was to be disciplined
and cautious in Russia given some of
the geo-political issues and sanctions,"
says Sam Finkelstein head of macro
strategies at Goldman Sachs asset
management global fixed income team.
"And, in the second half of the year, as a
generalization, oil exporting countries or
those very dependent on commodities
underperformed."
Yet, political instability in Eastern
Europe was positive for Latin America.
Goldman Sachs, for instance, replaced
some of its exposure to Russia or
commodity-intensive Latin American
credits with an overweight in Dominican
Republic and Honduras.
"Some of the bright spots have been
Honduras, which after a presidential
election got an IMF agreement," says
Finkelstein. "We started positioning in
Honduras during more stressed periods.
And, another country that actually benefits
from lower energy prices is Dominican
Republic, as well as a number of Caribbean
countries."
In Brazil, the wide-reaching implications
of the Lava Jato investigation into
corruption prevented any company
issuing bonds in late 2014 and the first
months of 2015. At the center of the
investigation, Petrobras has been most
severely hit by investors worried about the
implications of the scandal.
"Brazil is a challenging story," says
Finkelstein. "We dissected Petrobras, and
the ability of the company to report and
some of the companies that have business
relations with Petrobras that are certainly

Gaining ground
2015 Debt Investor Scorecard
Gross returns (%)

Allocated to
LatAm (%)

Assets ($m)

1-year

3-year

5-year

10-year

Emerging Country Debt

37.21

4,007

4.28

7.99

11.51

11.04

Barclays

Emerging Market Debt

42.76

261

6.3

6.48

Manager

Fund

1

GMO

2
3

Credit Suisse

Emerging Market Corporate Bond

28.52

506

3.49

6.31

4

Brown Brothers
Harriman

NN Emerging Market Debt

29.11

2,723

3.47

6.05

7.91

5

Goldman Sachs

Growth and EM Debt Portfolio

39.19

4,238

4.67

5.99

8.15

9.4

7.82

9.1

6

Kokusai

Emerging Sovereign

39.2

363

7.85

5.95

7

JPMorgan

Emerging Markets Strategic

31.09

310

3.36

5.95

8

Fidelity Funds

Emerging Market Debt

32.92

1,042

7.17

5.91

6.97

9

BlackRock

BGF Emerging Markets Bond

31.67

1,338

7.12

5.9

8.08

9.11

10

Pimco

Fixed Income Shares

58.44

1,970

4.48

5.61

7.42

10.92

Source: Lipper. Data to 31 March 2015

18 L ATINFINA NCE.COM - May/June 2015


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LatinFinance - May/June 2015

Table of Contents for the Digital Edition of LatinFinance - May/June 2015

Contents
LatinFinance - May/June 2015 - Cover1
LatinFinance - May/June 2015 - Cover2
LatinFinance - May/June 2015 - Contents
LatinFinance - May/June 2015 - 2
LatinFinance - May/June 2015 - 3
LatinFinance - May/June 2015 - 4
LatinFinance - May/June 2015 - 5
LatinFinance - May/June 2015 - 6
LatinFinance - May/June 2015 - 7
LatinFinance - May/June 2015 - 8
LatinFinance - May/June 2015 - 9
LatinFinance - May/June 2015 - 10
LatinFinance - May/June 2015 - 11
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LatinFinance - May/June 2015 - 16
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LatinFinance - May/June 2015 - 21
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LatinFinance - May/June 2015 - 47
LatinFinance - May/June 2015 - 48
LatinFinance - May/June 2015 - Cover3
LatinFinance - May/June 2015 - Cover4
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