LatinFinance - May/June 2015 - 19

under scrutiny. There was not enough
insight, or enough risk premium, or enough
clarity to start investing aggressively there."
Yet, many investors have stayed loyal to
the region's largest bond issuer. Barclay's
chose to hold Petrobras debt after the
company assured them that it would release
financial results before the end of April,
which it ultimately did.
Other Brazilian companies offer value,
say some. That goes particularly for
exporters, such as JBS, Marfrig or BRF,
which stand to benefit from the weaker
currency.
Fund managers have treated Venezuela
and PDVSA assets with caution. Bond
yields on both offer sparkling returns for
those game to dabble. Many investors have
avoided the sovereign and PDVSA. Yet,
others have been lured by the yield on offer.
"Where we have exposure to PDVSA is
at the short end of the curve, where you
could arguably say that there is less risk,"
Raza says.
And while the managers featuring in
LatinFinance's scorecard tend to focus on
dollar-denominated bonds, some have
ventured into local currency paper in their

search for returns.
"An area that we are more comfortable
in Brazil is local debt and is because the
Central Bank has hiked rates and we are
actually quite pleased with Joaquim Levy's
commitment to a fiscal reform and to
improving Brazil's fiscal accounts," says
Finkelstein. Uncertainty around when the
US Federal Reserve will increase rates has
dogged bond investors over the past year.
That looks set to continue, as analysts push
back their forecasts on when the longdiscussed rates move will take place. In late
April, some observers were predicting a
move toward the end of the year.
Liquidity, exchange rates, commodity
prices and growth forecasts for emerging
markets will play a part in determining
the overall market reaction to the event -
whenever it might happen. Some investors
are likely to redirect capital toward less
risky assets in the US. Others say better
growth there will spur a sunnier outlook
across the world.
After years of discussion as to when and
how the US will normalize monetary policy,
though, the final event is unlikely to cause
a dramatic repricing of Latin American

bonds, says Finkelstein. If anything, the rate
hike itself "may be something as a cleansing
moment, as a cathartic moment and
markets take it on a stride", he says.
Differentiation rules
In the months ahead, political, social and
economic issues in Latin America and the
world will determine where bond investors
can find value in the region. One theme,
however, is clear: top investors are focusing
their strategies on individual countries and
borrowers, rather than treating the region
as a single unit. The countries that cut their
reliance on revenues from commodities and
which show fiscal and monetary discipline
will be the ones that most spark investor
interest.
And of course, every rule has its
exception. While fund managers indicate
they will avoid Latin American credits tied
to the commodity cycle, Ellis notes that
"everything has a price".
"If prices continue to worsen, valuations
will get more and more attractive - then
that would tempt us to become interested in
the region. At the moment we don't see an
awful lot of value." LF

#túereslacámara

May/June 2015 - L ATINFINA NCE.COM 19


http://www.LATINFINANCE.COM

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
LatinFinance - May/June 2015 - 12
LatinFinance - May/June 2015 - 13
LatinFinance - May/June 2015 - 14
LatinFinance - May/June 2015 - 15
LatinFinance - May/June 2015 - 16
LatinFinance - May/June 2015 - 17
LatinFinance - May/June 2015 - 18
LatinFinance - May/June 2015 - 19
LatinFinance - May/June 2015 - 20
LatinFinance - May/June 2015 - 21
LatinFinance - May/June 2015 - 22
LatinFinance - May/June 2015 - 23
LatinFinance - May/June 2015 - 24
LatinFinance - May/June 2015 - 25
LatinFinance - May/June 2015 - 26
LatinFinance - May/June 2015 - 27
LatinFinance - May/June 2015 - 28
LatinFinance - May/June 2015 - 29
LatinFinance - May/June 2015 - 30
LatinFinance - May/June 2015 - 31
LatinFinance - May/June 2015 - 32
LatinFinance - May/June 2015 - 33
LatinFinance - May/June 2015 - 34
LatinFinance - May/June 2015 - 35
LatinFinance - May/June 2015 - 36
LatinFinance - May/June 2015 - 37
LatinFinance - May/June 2015 - 38
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LatinFinance - May/June 2015 - 40
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LatinFinance - May/June 2015 - 43
LatinFinance - May/June 2015 - 44
LatinFinance - May/June 2015 - 45
LatinFinance - May/June 2015 - 46
LatinFinance - May/June 2015 - 47
LatinFinance - May/June 2015 - 48
LatinFinance - May/June 2015 - Cover3
LatinFinance - May/June 2015 - Cover4
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