Salient to Investors:
Joyce Chang at JPMorgan Chase said QE3 puts emerging-market corporate and sovereign debt in a sweet spot by reducing bond supply and prompting investors to seek higher-yielding debt – modest borrowing by emerging-market governments and companies has avoided a supply glut. Chang favors commodity-related currencies including the Russian ruble, Mexican peso and Brazilian real.
Dollar-denominated government debt in developing countries has returned 14 percent this year versus a 12 percent gain in corporate securities, and 2.4 percent gain in Treasuries.
Lupin Rahman at Pimco favors local-currency bonds in Brazil, Mexico and South Africa as slower global economic growth allows the countries to keep interest rates low. Rahman said the Brazil real is her currency of choice.
Alberto Ades at Bank of America likes the Russian ruble, Mexican peso and Brazilian real as QE3 weakens the dollar.
Michael Shaoul at Marketfield Asset Mgmt said developing countries’ equities should be avoided as they are in the middle of a bear market as the credit expansion in nations such as Brazil and China starts to reverse.
The MSCI Emerging Market Index is up 8.9 percent in 2012 versus the S&P500 gain of 15 percent.