Browsing: Emerging markets

Charles Roth, of Thornburg Investment Management, has made the case that markets have over-reacted to the recent political shake-up in South Africa, driving asset prices below their underlying value. Thus (although Roth doesn’t put the point quite this bluntly) this could be a time for some bargain hunting.  Finance MinistryRead More

Natixis Global Asset Management has released the results of a survey of 500 institutional investors, asking them their views on prospects for 2017. The surveyed institutions expect that political and economic developments could cause an increase in volatility in the year to come, and active managers have to reset theirRead More

A new paper by G. Nathan Dong and two other scholars investigates private equity placements in China and their consequences for the issuing firms. The study works from a natural experiment that resulted from regulations created by the PRC ten years ago. In 2006, the China Securities Regulatory Commission issuedRead More

Hedge funds, among them some of those the unsympathetic call “vultures,” bought into the bonds of the Petróleo de Venezuela SA (PDVSA) early this year. PDVSA is Venezuela’s state-owned oil company, the consequence of nationalization forty years ago. Its fate turns on (a) the vagaries of post-Chavez politics in thatRead More

In a recent paper submitted to the G20’s working group on international financial architecture, scholars with the Bank for International Settlements have warned that an accumulation of debt in the years since the global financial crisis has left the emerging market economics (EMEs) vulnerable to capital outflows. The authors ofRead More

The Hon. Thomas Griesa, of the U.S. District Court for the Southern District of New York, has issued an “indicative ruling” in response to a motion by the Republic of Argentina.Read More

The present depressed state of commodity prices spells continued trouble for those companies that export said commodities, but also spells opportunity for those that import and make use of them. Some thoughts from Neuberger Berman, with an addendum from BlackRock. Read More

Olivier Blanchard has just stepped down as the chief economist of the International Monetary Fund, a post he has held since 2008. Faille looks at a new article that may be considered his parting shot from that parapet.Read More

NML tried to get around the sovereign immunity of Argentina's Central Bank by arguing that it and the Republic were only one entity (the "alter ego" theory developed by the U.S. Supreme Court in an opinion concerning Cuba, in the 1980s), and that the one entity involved has waived its/their immunity. No dice. Read More

China's moves in recent days seem likely to set off a new Southeast Asia currency crisis, which will look a lot like the old Southeast Asia currency crisis. This was clear even on August 11th, when traders in the rest of the world were apparently working on the premise that China's move that day was a one-off. Read More

PwC offers a glimpse of a 'day in the life' of a typical compliance analyst in 2015 and again in 2020. As these authors tell it, the day is filled with data, darkness, and drudgery at present, but it will be airy, alliterative, and analytical in another five years. Read More

Factor models will evolve as researchers untangle what value is to be attributed to what factor. Model selection, then, has to remain flexible to keep pace with such research, and must of course remain useful for the investment decision makers. Read More

The controversy over corporate governance, and whether the changes favored by reformers show up as superior corporate performance (as measured, for example, by Tobin's q) strikes Faille as dangerously abstract. The only way to get to the pointillist painting is by starting with particular data points. Read More

Moody’s Investor Services has assigned a provisional A3 rating to a $750 million multi-currency sukuk issuance program established by Telekom Malaysia Berhad. Meanwhile, also in Malaysia....Read More

According to Eurekahedge the hedge fund industry globally returned $54.1 billion in performance gains in the first quarter 2015. This is the greatest first-quarter gain since before the global financial crisis. Read More

Indexes labeled as representing developed market equity include companies with significant and increasing exposure to macro-economic trends in the emerging markets. A portfolio that tracks such an index may well have much more such exposure than its managers or investors had bargained forRead More

Felix Zulauf is the principal of Zulauf Asset Management, and a former global strategist for the UBS Group. He said that central banks have intervened on such a large scale of late that they have left "global financial markets ... more distorted than ever before and accordingly the risks are very high." Read More

A new report from Eurekahedge tries to go beyond some obvious observations about the performance of hedge funds there in 2014, or about the performance of that country's broad economy last year. Eurekahedge talked to seven experts in the field. They took quite different views on the most basic of questions. So different that a contrarian would have a tough time finding the consensus to counter. Read More

William Browder's new book, Red Notice, is a fascinating window into the recent history of Russia, both when Yeltsin (and at first Putin) welcomed foreign investment and then when things turned very ugly for those investors. Read More

Most efforts to introduce "entropy" into finance have seen it as a quantity to be minimized. A new paper, which begins as an effort to explain barbell portfolios, uses entropy in a different manner. Unfortunately, it doesn't really end up clarifying those barbells. Read More

In the middle of the year now ending, the U.S. Supreme Court delivered as complete a victory as it could manage to the hold-out bondholders in the Argentine-default dispute. Enforcement efforts plod on, and it seems likely a related story could make our top five list next year, too. Read More

Two World Bank economists review the impediments that face the growth of the sukuk market, impediments often inherent in the theological precepts that gave rise to it. Part of the solution: well-functioning money markets as a context for sukuk issuance. Read More

Only two hedge fund strategies performed in the positive numbers in October, the rest were all in the red. Managed futures did best, according to the Eurekahedge numbers, benefitting from their short positions on oil prices. Read More

In what will be its last regular monthly report on such matters, GFIA tells us that a sharp correction hit markets in Asia ex Japan in September, and tells us of some of the funds that defied the outgoing tide. Read More

India accounts for much of the positive showing of Asia ex-Japan in the hedge fund world YTD. That positive showing, in turn, may be attracting asset flow. Read More

GFIA shares some ruminations about the relationship between the abundant academic work on alternative investment and the insights of practitioners. Meanwhile, the Bank of Japan seems to be engaged in some ruminations of its own, and practitioners have to await the results.Read More

If I should declare that I will never eat duck, and then I simply re-name certain ducks “chickens” and eat them, then people who genuinely as a matter of principle refuse to eat duck may consider me a false friend. And those who have no objection to the eating of duck may think me a silly goose. Read More

There are several channels for spill-over effects, whereby the actions of the Federal Reserve and the ECB can have grave consequences around the world. Psychological consequence, in particular herding, is among them. Read More

Banco Espirito Santo, and its CEO Salgado, had emerged from an earlier round of crisis (way back in 2012) with a roseate smell. Their latest smell ... not so good. Read More

The latest report from Eurekahedge mentions that though instability is "brewing again in the Middle East," things have settled down a bit in Eastern Europe. This report was written prior to the shoot down of a Malaysian jet over the Ukraine. Read More

In Asia the high-net-worth population still consists largely of the first-generation wealthy. So: what are these Asian entrepreneurs looking for in their private banking services? That is one of the questions McKinsey considers. Read More

The Chair of the Federal Reserve cannot with any plausibility look upon market bubbles as something exogenous, something that just happens to the earth, like a meteor shower, something from which she and others in her august circles can seek to protect us. Read More

GFIA says that most of the Asia Pacific managers it tracks generated substantial returns above the relevant index in May 2014. The long-biased firms did best there, their event-driven peers … not so much. Read More

Justice Scalia's opinion has the support of Justices who aren’t, to say the least, reliable allies of Scalia’s in the kind of ideologically driven splits that draw so much MSM attention, Obama appointee Elena Kagan as well as Clinton appointee Stephen Breyer are on board. On Monday, June 16th, the U.S. Supreme Court delivered a stunningly complete victory for NML Capital, the holdout bondholder in the much-watched litigation arising out of Argentina’s 2001 bond defaults. On the one hand, SCOTUS refused to hear Argentina’s appeal from the Second Circuit’s decision on what the issuing documents meant by the pari passu language. A decision not to decide has no precedential significance itself, but this of course leaves the Second Circuit’s decision, issued in October 2012, intact. Both as a matter of the law as it applies to this case, and as a matter of precedential significance for many similarly worded documents, the Second Circuit is the circuit that counts. What is Left Standing? The Second Circuit left standing, and now the Supreme Court has also left standing, a district court injunction against any payments that in any way rank holders of the restructured debt over the hold-outs. What the Second Circuit said was that in the pari passu clause in the issuing documentation of these Fiscal Agency Agreement bonds (FAA), the sovereign “manifested an intention to protect bondholders from more than just formal subordination.” The language was there to protect them precisely from what Argentina has more recently tried to do, that is, to protect them from any arrangement by which “Argentina as payor [discriminates] against the FAA bonds in favor of other unsubordinated foreign bonds.” On the same day (a few minutes later) SCOTUS also delivered a full-dress opinion on a related issue. The New York district court has interpreted the Foreign Sovereign Immunities Act of 1976 narrowly, so as to allow for discovery orders that assist NML in its search for Argentina assets in third countries where they may not be immune. Since Argentina owes NML more than $1.5 billion, it has plenty of incentive to continue this search. The Supreme Court upheld that statutory construction. The opinion wasn’t closely split. There was one dissent (Justice Ginsburg) and one recusal (Sotomayor). Still, the opinion for the other seven Justices, written by Justice Scalia, had the support of Justices who aren’t, to say the least, reliable allies of Scalia’s in the kind of ideologically driven splits that draw so much MSM attention. The 7-justice majority included Obama appointee Elena Kagan as well as Clinton appointee Stephen Breyer. What Happens Next? Argentina’s immediate reaction was that it will fight on, apparently by continuing to pay the favored creditors [Exchange Bondholders] and by continuing to exclude from these payments the FAA hold-outs. “What I cannot do as President is submit the country to such extortion,” says President Cristina Fernandez. The legal fight is over, though. And I should add that part of what SCOTUS has let stand here is a district court order the copies of its pro-holdout injunction be provided to “all parties involved, directly or indirectly, in advising upon, preparing, processing, or facilitating any payment on the Exchange bond.” Argentina’s New York agents cannot now give out money to the Exchange bondholders without aiding and abetting the defiance of a court order. Argentina must now either pay $907 million to the plaintiffs by the end of this month, or lose the ability to use U.S. financial intermediaries of any kind to pay the holders it has favored. The only possible means by which Argentina can resist the “blackmail” now and continue to pursue the policy it has in recent years is if it can pay the favored creditors without the involvement of any financial intermediary subject to U.S. court orders. This would prove tricky, especially with a tight schedule. The Rest of the World And of course even success there leaves Argentine open to the second of SCOTUS’ two punches, discovery and perhaps successful seizure of assets in third countries. Leaving Argentine matters to the side: what will be the consequence of NML’s victory in this matter, and the now-regnant Second Circuit reading of the pari passu clause, on the market for EM nation bonds? If, as at least some authoritative sources have indicated through this long fight, the pari passu language used in Argentina in the FAA followed “standard language included in substantially the same form in numerous credit documents” and if this decision changes how that language has been understood, then the markets will have to develop work-arounds: because from time to time sovereigns will default, and some sort of restructuring will have to occur. How those work-arounds will work is beyond me. But then, given my poor record trying to predict the twists and turns of this saga that is perhaps for the best. Read More

Given recent political news, it is perhaps unsurprising that, in the words of Eurekahedge, hedge fund managers "investing with an India focus and employing systematic trading strategies [posted] strong gains" in May 2014. Read More

What is the big picture for these authors? Are China and the U.S. trading places, so that China will have a middle class and the U.S. won’t? No. What is happening is a bit more subtle than that. Read More

Investors continue to "crave for exposure" to Asia, and even to Japan. India is especially exciting to some, perhaps because of hopes for the near-term political success of the BJP. Read More

Asset managers within the Asian boutique universe keep telling GFIA that "asset raising is hard" in the present climate. It isn't going to become easy any time soon, but there is a new level of stability.Read More

Allen & Overy’s white paper puts it among those who take a rather gloom-and-doom attitude toward the likely consequences of a recent Second Circuit decision on Argentina's default. Personally, I don't agree that the sky is falling on the sovereign debt market.Read More

One of the Africa-oriented hedge funds showcased, Altree, expects that as the African market matures short opportunities will become available. Another, Nubuke Africa Multi-Strategy, makes a point of limiting its exposure to South Africa and Egypt (presumably the two most tempting countries of concentration) to no more than half its portfoilio, to ensure that its investments will remain pan-African. Read More

As Guillermo Calvo noted in 1991, one of the problems with sterilization is simply that the larger amount of government debt itself induces higher inflationary expectations "because sticking to a stable price level ... would make servicing the public debt excessively costly from a social and political point of view." Read More