Luz Padilla of DoubleLine emerging markets webcast slides.
Emerging Markets Fixed Income Fund: Portfolio Performance – Quarter End September 30, 2015
Low Duration Emerging Markets Fixed Income Fund: Portfolio Performance – September 30, 2015
TAB I – External Global Headwinds Remain
Emerging Markets Fixed Income – Headwind Starting 2015
In the February 2015 Emerging Markets (EM) webcast, we identified key risks for Emerging Markets. As the year has progressed, we have seen these risk begin to play out.
- Country Specific Risks
- “Terrible 3” – Argentina, Venezuela, Ukraine
- Countries in Transitions – Brazil and Russia
- Greece
- Rising U.S. Treasury Yields
- Global Growth Slowdown
- Falling Commodity Prices
Emerging Markets Fixed Income – Challenges Ahead
Risks we see for the remainder of the year
- Global Growth Slowdown
- China
- Political Risk
- Brazil, Venezuela, Argentina, Russia
- Potential for Rising U.S. Treasury Yields
- Potential for Falling Commodity Prices
TAB II – Developed Market Headwinds
Emerging Markets – The Fed on Hold in September
? The FOMC maintained the target range for the federal funds rate at 0% to 0.25% at the September 17, 2015 meeting
Emerging Markets – Monetary Policy Divergence
Emerging Markets – Dollar Strength a Headwind for Commodities
TAB III – China and Falling Commodity Prices
Emerging Markets: China Equity Sell Off – Shanghai Composite Index
Emerging Markets – China has a Strong Balance Sheet
- Reserves: US$3.6 trillion
- Net foreign assets: US$4.4 trillion
- Trade surplus averaged around US$45 billion a month so far this year
- Current Account Surplus: +2.76% of GDP
Emerging Markets – China Engaged in Significant Policy Easing
- Cutting interest rates
- Easing Reserve Requirements for banks
- Easing home purchase regulations
- Easing local government debt financing
These measures typically work with lags, so we expect to see the impact over the coming quarters
TAB IV – Brazil in Focus
Emerging Markets Outlook – Brazil Political Risk
President Dilma Rousseff’s government has been trying to implement deep and unpopular fiscal and structural reforms. Congress opposition to the adjustment has led to continued fiscal account deterioration.
High level executives and politicians allegedly received kickbacks from state?oil company, Petrobras, in a corruption scandal know as Lavo Jato.
Corruption charges and policy uncertainty regarding the fiscal adjustment has led to:
- Erosion of consumer and business confidence
- Stalled investment and growth
- Deterioration of fiscal account and rising debt levels
- Loss of investment grade rating by S&P
See full PDF below.
