BBH produced the following ratings model to assess relative sovereign risk in Frontier Markets. A country’s score directly reflects its creditworthiness and underlying ability to service its external debt obligations.
Almost 20 years ago, global fixed income investors scarcely heard of the word ‘sukuk’, let alone understood the asset’s unique structural features or benefits. Much has changed since, with the global sukuk issuance topping USD74.8bn at the end of 2016. But with the asset class’ impressive growth being hamstrung by liquidity shortages and a lack of global standards, the development and proliferation of those standards – and a protracted effort on behalf of market makers to harmonise those standards – is needed to help take the market to the next level.
Emerging Market FX ended Friday on a mixed note, as risk assets recovered a bit from broad-based selling pressures. Best Emerging Market performers on the week were ZAR, PHP, and CNY while the worst were COP, RUB, and ARS. Besides the risk-off impulses still reverberating through global markets, we think lower commodity prices are another headwind on EM.
The decline in the Dollar versus Emerging Markets (EM) currencies began two years ago with more room to run, in our view. The unwinding of QE policies in the coming years will continue to weigh on the Dollar, and EM stands to benefit as capital inflows to EM ease important financial constraints. This should unleash stronger domestic demand and eventually more rate hikes than the Fed will deliver.
EM FX ended Friday on a weak note, and capped off a week of softness. We felt that more and more EM policymakers were getting uncomfortable with FX strength and are likely welcome this recent weakening. However, that’s only if their stock and bond markets hold up, which they are (for now). Friday was clearly the dollar’s day to shine. What’s more important is how the markets trade Monday. Do they sell into USD strength as we’ve seen the last several weeks or do they try and extend USD gains?
As state funding dwindled for many airlines that traditionally relied on government for support, they have been forced to find new pools of liquidity – or face financial ruin in a sector that has seen major upheaval over the past year.
With over USD33bn of issuances year to date in 2017 – from just under USD2.5bn in 2008 – the sovereign Sukuk market has grown rapidly over the past decade. Despite such progress, there remains room for further unprecedented growth. The market remains restricted by liquidity constraints, higher costs, and a lack of deep understanding of the Sukuk instrument. If proactive, however, borrowers can overcome these challenges in the pursuit of high-quality borrowing instruments.
2017 has been an amazingly profitable year for investors in emerging and frontier markets. As uncertainty takes hold, driven by a hawkish Fed outlook and China's slowdown, Mark Mobius, the outgoing Chairman of Franklin Templeton's Emerging Market Group, takes a parting shot at predicting what the coming year has in store for the markets.
As Europe continues to steam ahead towards the 3 January implementation date for the Markets in Financial Instruments Directive II (MiFID II), the continent’s ambitious sequel aimed at making its financial industry safer and more transparent, a lack of certainty around how the rules will be applied is putting bond bankers on edge and prompting difficult questions about how the banking sector is likely to evolve following their introduction.
The administration of President Juan Manuel Santos is entering its final stretch with presidential elections next year, prompting Colombia Gold Letter to take the pulse of sentiment in the mining and exploration sector on several key issues.
- Off The Record: The Top 5 Emerging Market Credit Trends in 2018
- Latin American Governments Welcome Back Miners With Open Arms, Local Communities Less So
- Emerging Markets FX Technical Picture: How Far Can This Correction Go?
- Current Political and Geopolitical Landscape Across the Major Latin American Economies
- Interview: Adam Hendley, MD, Head of Mining & Metals - US, Canada & Latin America, HSBC
15 Feb 2018