LATAM WRAP-Investors spy opportunity in wake of LatAm sell-off

viernes 21 de agosto de 2015 13:13 GYT

By Paul Kilby

NEW YORK, Aug 21 (IFR) - A handful of buyside firms are seeing opportunity and remain determined to stay the course even as many other investors made a large-scale retreat from the asset class this week.

Retail accounts took out some US$2.49bn from dedicated EM bond funds this week - the largest weekly outflows recorded by EPFR since January 2014.

A confluence of events are turning up the heat once again in emerging markets. The devaluation of the yuan is causing greater concerns about an economic slowdown in China and the subsequent impact this might have on commodity prices, which have already taken a massive tumble this year.

That combined with the looming prospects of rate hikes in the US, a possible intensification of conflicts in Korea and the Ukraine, and rising political risks in Turkey and Brazil have only served to weaken stocks, credit and FX markets across the EM spectrum.

LatAm commodity names took a bashing this week after US crude hit six-year lows on Thursday. The 2020s issued by Ecuador, where oil accounts for about 52% of its exports, have fallen 3.3% since Wednesday to trade today at 85.20.

Other oil-related credits have also slipped this week, with the 2025s issued by Colombia's Ecopetrol dropping about a point over the week to 93.875.

It is a similar story among Brazilian corporates, which have been the clear underperformers for the region, in some cases gapping 100bp over the last several weeks.

The 2024s issued by state-controlled Petrobras, which has been at the center of a corruption scandal, are now trading at around 620bp-610bp, some 60bp wider to levels seen earlier this month.   Continuación...