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Emerging markets bonds in demand

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Economic growth in the emerging markets has picked up substantially, while that in the industrialised economies has been rather stable. This has led to an increase in the growth differential in the emerging markets’ favour. Investor demand for emerging markets bonds has been on the rise in search of higher yields and interest rates.

High liquidity, key-lending rates at zero percent in the Eurozone, and in some cases negative interest rates support the riskier bond segments. Corporate bonds from the emerging markets are particularly interesting by comparison.

Yield and volatility in comparison (data as of 30 September 2016) *)

Data as of per 30 September 2016; Source: ERSTE-SPARINVEST KAG
Data as of per 30 September 2016; Source: ERSTE-SPARINVEST KAG
*) Note: the fund ratio “yield” is equal to the average yield of the securities held by the fund prior to the deduction of costs arising from hedging foreign exchange risks; please bear in mind that this yield ratio is not equivalent to the fund performance. The chart above does not take into account any costs that would diminish returns such as management fees or individual account management or deposit fees. In statistics, the term volatility denotes the propensity of a time series to fluctuate. In finance, it serves as measure for the risk of an investment. The risk of fluctuation rises along rising volatility.

European corporate bonds more attractive than government bonds

The segment of European government bonds is still not overly attractive. The historical volatility of these bonds is 4.0%, with an expected yield of currently only 0.5% priced in. By comparison, Eurozone corporate bonds are more attractive: expected yield amounts to 1.2%, at a clearly lower volatility than for euro government bonds.

Interest rate policy and US presidential elections driving the markets

The interest rate policy of the US Fed is a more crucial factor for market participants than the imminent US presidential election on 8 November, where according to polls Clinton is clearly ahead. The US Fed has already signalled it is prepared to raise interest rates. An increase in December is likely.

If the stock exchanges were to react negatively to the rate hike in December, this might create an interesting opportunity to invest in high-yield bond segment such as emerging markets corporate bonds.

 

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Legal disclaimer

This document is an advertisement. All data is sourced from ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the InvFG 2011 in the currently amended version. The simplified prospectus is prepared by ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. and published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the ImmoInvFG 2003 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and for ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to § 21 AIFMG, the simplified prospectus, and the key investor document/KID can be viewed in their latest versions at the web site www.erste-am.com or www.ersteimmobilien.at or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus or simplified prospectus, the languages in which the key investor document/KID is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com or www.ersteimmobilien.at.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

Paul Severin

Paul Severin has worked at Erste Asset Management since April 2008. Until 2012 he was responsible for the company’s product management; he has directed communications and PR activities since April 2012. From 1992 to 2008, he was director of equity fund management and deputy director for institu...

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