Investec buys Turkey debt
Investec Asset Management’s emerging market debt team said on Monday it had been looking for buying opportunities after recent turmoil and had bought Turkish bonds and Turkish lira.He said the South African-owned firm, which manages $300 million in emerging market debt not including $8.5 billion in South Africa itself, was looking for the most liquid markets.
“If we are wrong we can unwind these decisions,” Gey van Pittius said.
Investec AM reckons contagion from the U.S. credit market crisis — which has pushed emerging market debt spreads over U.S. Treasuries out about 70 basis points since mid-June — will be contained.
It suggested in its most recent note that emerging debt markets may be close to pricing in enough negative news.
Given that global recession is unlikely and that psychological contagion is often short-lived, it reckons there are buying opportunities around.
Like others, Investec AM noted that circumstances have changed within emerging markets. Problems in one area do not necessarily spill over into others and country and currency selection is more important.
The firm, for example, believes recent elections in Turkey will allow Ankara to continue with strong economic reforms, hence its recent bond and lira move.
“The government has done a really good job,” Gey van Pittius said.
Turkish bond spreads as measured by JP Morgan’s emerging market index were 226 basis points over Treasuries on Monday versus 205 bps on May 1.
In its latest report covering the end of July/beginning of August, meanwhile, the firm said its biggest debt longs were Turkey, Chile, Israel and Brazil, while it was short in Poland, the Czech Republic and Slovakia.
In currencies, its biggest longs were in the Brazilian real, Argentinean peso, Polish zloty, Chilean peso, Nigerian naira and Turkish lira, while it held key shorts in the Taiwanese dollar, Korean won, Czech koruna and South African rand.