We believe the Fed is on track to hike at least three times this year. Yet EM currencies were mostly firmer in Q1, despite Fed tightening typically being very disruptive to EM. Why? The US dollar lost some traction as markets pushed out Fed tightening beyond March and Treasury Secretary Mnuchin seemed to push out fiscal stimulus into 2018. Rising commodity prices also helped buoy EM.
The sacking of South Africa’s finance minister and his cabinet prompted another all-too-familiar slide in the rand and bond prices. As his successor takes office, the markets are tentatively awaiting signs about the direction of economic policy.
Bonds & Loans spoke with Michael Dunning, Regional Head of Analytics Group in EMEA Region for Fitch, about the success of Russia's macro outlook for 2017, the success of the banking sector clean-up and the prospects of the rouble.
Latin America Structured Finance Advisors, in conjunction with our partners in Brazil, used analysis of the buckets for aging bad loans to verify the findings of the rating agencies with an analysis of bad loans in 49 credit portfolios of Brazilian ABS. We found that most of the bad loans have reached 180 days past due and the percentage of delinquent loans in the earliest aging buckets have fallen below pre-2015 levels. This supports our view that Brazil’s credit crisis has peaked.
With about ZAR72bn in senior unsecured bank debt maturing in 2017 and new Basel III requirements being phased in January 2018, analysts are forecasting an uptick in senior and subordinated issuance in South Africa through 2017 – a welcome change from relatively subdued volumes seen last year.
Brazil’s economic team has set itself the goal of reclaiming Brazil’s investment grade rating. Some believe, however, that the government should not give so much importance to the rating agencies. After all, they failed to predict the global crisis of the previous decade.
As the risk of emerging market capital outflows continues to increases, EM government have become more sensitive to unfavourable reports by international institutions.
No crisis lasts forever. But the present one in Brazil is testing the patience of everyone. GDP has contracted now for seven straight quarters, after a 2014 that was largely lethargic in terms of output. Nor is there any discussion of an inflection point to a cyclical upturn in activity. The only thing on the horizon is economic stabilisation.
Why would Latin America Structured Finance Advisors (LASFA) write an article that airs the dirty laundry for the Brazilian Asset-backed Security market (ABS market or ABS) when it is currently seeking investors for this market? Because many foreign investors are lured by the high interest rates offered in Brazil’s local credit markets and this is a discussion that any investor needs to consider when evaluating an investment in Brazilian ABS, which is undoubtedly risky.
Moody’s Baa2 rating for the €288mn Euro-denominated bond to finance a state-of-the-art hospital campus in Elazig reaffirms the success of Turkey’s healthcare development program funded through PPPs over the last decade, and could set the stage for a project finance surge in the country.
- South African Fundamentals Boost to Credit Despite Expected Downgrade
- Turkey: Life After Downgrade
- Turkey’s post-downgrade US$1.5bn bond feat puzzles sceptics
- South African politics to make downgrade inevitable
- Paraguay and Peru break trend as LatAm economies slow
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