Access fast growing and diverse economies
Emerging or developing markets have more opportunity to grow their economies (coming from a lower base). There is potential for more upside for investors relative to developed markets. These countries – and their investment universes – continue to grow and evolve and this creates opportunities for excess returns and diversification.
Investing in emerging markets debt offers the potential for attractive returns above alternate credit asset classes, especially in the prevailing low interest rate environment.
We look further ahead for growth opportunities
Whether our clients choose from our range of actively managed strategies, or are looking for a more bespoke solution, what remains consistent is a proven investment process focussed on delivering risk adjusted returns.
Why invest with us?
Diversified exposure to emerging markets: our strategy is to invest in sovereign, quasi sovereign and corporate bonds. Our investment process gives us flexibility to choose where opportunities are available in the market to generate returns for our clients.
Tailored portfolios: designed specifically for our clients, all of whom have different needs. We build collaborative relationship with our clients in order to achieve their investment objectives.
A proven track record: over the last decade, we have successfully navigated market cycles and idiosyncratic country turning points. Not only this, our active investment style and focus on risk management means we’ve been able to offer protection on the downside.
ESG integration: Specific country and corporate ESG considerations are an essential part of our in-house research .
Superior research helps us to take advantage of the opportunity
Emerging markets are often slow to price developments, both positive and negative. Through our superior research and systematic forward looking analysis, we believe that we can take advantage of this mispricing by identifying instances where consensus has become too bullish or too bearish.
Why we are watching mispricing in Turkey
Turkey’s economic recovery was materially impacted by the pandemic. Once the fight against the COVID-19 pandemic gained some ground, Turkey started to ease the restrictions imposed since mid-March. Data released by the Ministry of Health towards the end of June was encouraging, with the number of new cases and daily casualties having peaked and with recoveries on an upward trend. Success against the pandemic and early start of the normalization process proved to be positive as the budget deficit slowed.
Caution remains and fairly so, given the risk of a second wave of cases following the easing of restrictions. Any economic recovery will likely have been hampered by the weakness of external demand until Turkey’s export markets, in particular Europe, recovered. The future of tourism – a key industry for both the official and grey economy – depends on the global success against the pandemic and the easing in global travel.
We have taken advantage of opportunities in Turkey during periods of mispricing. The country’s bonds have been volatile and investment discipline has been necessary. Market technicals, valuations, a belief in the strength of Turkey’s institutions and geo-politics have been drivers for our recent positioning.
Meanwhile, credit fundamentals require a strong focus. Access to USD liquidity and net foreign assets of the central bank are key considerations. A sharp reversal in Turkey’s current account positon from a weaker currency is normally the path to growth for the country. However, the pandemic’s hit to global growth and fiscal shocks for Turkey mean we remain cautious until the budget deficit is controlled and the Turkish currency stabilises without on-going reduction of USD reserves.
How we invest in Emerging Markets Debt
How can I use emerging markets debt in my portfolio?
Diverse sources of growth in a single asset class
There are plenty of idiosyncratic factors driving returns within emerging markets. Our clients have broad diversity across risk and reward opportunities coupled with the significant potential to benefit from economic growth differentials versus developed markets, and to gain access to a large range of expanding geographies, countries and sectors.
Offering our clients the potential for a yield greater than most fixed income asset classes.
Offering our clients diversification across the economic drivers of emerging markets, providing idiosyncratic opportunities.
Giving our clients access to investment grade and high yield, hard currency and local currency as well as sovereign, quasi sovereign and corporate bonds. A diverse asset class with differing risk return characteristics that can be tailored to specific objectives.
Our corporate RI strategy is based upon three strategic pillars of quality, stewardship and engagement.
Our approach to investing is driven by a commitment to providing the best possible outcomes over the long term for our clients. The team considers ESG factors relative to their potential impact on financial performance. We believe that ESG issues have a significant bearing on risk.
The information contained within this document is generic in nature and does not contain or constitute investment or investment product advice. The information has been obtained from sources that First Sentier Investors (“FSI”) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information. Neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this document.
This document has been prepared for general information purpose. It does not purport to be comprehensive or to render special advice. The views expressed herein are the views of the writer at the time of issue and may change over time. This is not an offer document, and does not constitute an investment recommendation. No person should rely on the content and/or act on the basis of any matter contained in this document without obtaining specific professional advice. The information in this document may not be reproduced in whole or in part or circulated without the prior consent of FSI. This document shall only be used and/or received in accordance with the applicable laws in the relevant jurisdiction.
In Hong Kong, this document is issued by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. In Singapore, this document is issued by First Sentier Investors (Singapore) whose company registration number is 196900420D. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
First Sentier Investors is a business name of First Sentier Investors (Hong Kong) Limited. First Sentier Investors (registration number 53236800B) is a business division of First Sentier Investors (Singapore).
First Sentier Investors (Hong Kong) Limited and First Sentier Investors (Singapore) are part of the investment management business of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc. (“MUFG”), a global financial group. First Sentier Investors includes a number of entities in different jurisdictions.
MUFG and its subsidiaries are not responsible for any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.