EMTA Forum in Zurich - May 11
EMTA FORUM IN ZURICH
Thursday, May 11, 2017
Sponsored by
Steigenberger Bellerive au Lac
Utoquai 47
Zurich, Switzerland
3:30 p.m. Registration
4:00 p.m. Panel Discussion
Prospects for the Emerging Markets
David Hauner (Bank of America Merrill Lynch)– Moderator
Philipp Good (Fisch Asset Management)
Enzo Puntillo (GAM)
Olgay Buyukkayali (Goldman Sachs)
Inan Demir (Nomura)
5:00 p.m.
Cocktail Reception
Additional Support Provided by Bank of America Merrill Lynch, Goldman Sachs and Nomura.
Registration fee for EMTA Members: US$75 / US$695 for non-members.
We regret that this event is not open to the media.
Swiss Investors Affirm Desire to Remain Invested in EM Debt at Zurich Forum
The vast majority of attendees at EMTA’s Forum in Zurich, according to an informal poll, wanted to remain invested in EM debt. The poll was conducted by David Hauner (Bank of America Merrill Lynch) at the outset of his moderating duties at the May 11, 2017 event. EMTA’s Zurich Forum was sponsored by MarketAxess, with Bank of America Merrill Lynch, Goldman Sachs and Nomura providing additional support.
In light of the audience’s continued interest in EM debt, Hauner asked speakers to identify factors that could derail strong performance. GAM’s Enzo Puntillo argued that a further EM bond and currency rally was still possible. Puntillo based his assertion on improved fundamentals in EM countries, still attractive valuations, and the continued under-allocation by investors in the debt asset class.
Fisch Asset Management’s Philipp Good revealed a more cautious viewpoint, specifying his firm’s neutral outlook. Good anticipated greater volatility to emerge from EM countries themselves. Olgay Buyukkayali (Goldman Sachs) believed that greater opportunity for EM gains was likely to be in local currencies, while underscoring that improved exports provided fundamental support.
Inan Demir of Nomura also expressed a positive short-term view on EM debt. However, a “sea change” remained in the offing, with the US FOMC now more likely to raise rates and decrease its balance sheet with the ECB eventually following. “Changes in global liquidity will have its effects on some EM countries,” he concluded.
Hauner then conducted a second audience poll. By show of hands, the audience was divided between those whose case for EM investment was based on fundamental factors, and those whose investments were a result of global liquidity and the chase for returns.
Hauner steered the panel to a discussion of individual economies. Demir called the recent Turkish rate hike “credible” and “definitely supportive” of lira-denominated assets. “However, I was surprised by the domestic criticism of the Central Bank; now that the referendum is over, we are seeing disagreement,” he added. Demir noted that Turkey’s debt/GDP ratio “was good, and even if it does deteriorate, that would take a long time.”
Buyukkayali shared many of Demir’s views, agreeing that the Turkish lira would be supported near-term by tighter liquidity. However, “my highest conviction is in the Russia local duration, which has the highest real rates in EM in particular adjusting for expected inflation volatility,” he stated.
On frontier investments, Puntillo judged Ghana to be “reasonably compelling.” Buyukkayali championed the case for Egypt, “one of the most attractive within the less-liquid EM countries, but this is not an out-of-consensus trade,” he acknowledged. Good added that reforms in MENA countries generally were moving at a “slow and comfortable pace, but some countries should probably be doing a bit more.”
South Africa remained in need of a structural change and improved politics in order to “get back on track,” according to Puntillo. Demir recognized the challenges South Africa faced, but stated “there is enough reason to argue that the country is not on a pre-determined [downward] course.”