EM Debt & Macro Outlook (with Francine Lacqua)

Introduces the discussion on EM resilience despite geopolitical tensions, noting spreads are tight.

Francine Lacqua

Kathy Hepworth

EM resilience is driven by global liquidity and yield-seeking; fundamentals, technicals, and relative value are supportive. Dispersion across spreads, rates, and FX is key.

Investors need to be measured and differentiate between asset classes. Higher-yielding issuers have outperformed due to good carry and proactive debt management.

Kathy Hepworth

Winners in hard currency are higher-yielding oil exporters like Angola and Ecuador; losers are Central/Eastern Europe and some Asian countries due to oil imports and poor FX policy.

Countries that intervened improperly in FX have lost investor confidence.

Asks about Latin American elections and their impact on investors.

Francine Lacqua

Kathy Hepworth

Colombia's election is binary; more of the same is not good due to large fiscal/current account deficits, but compensation exists in local markets. Colombia has been proactive in debt management.

Brazil is more insulated from the oil conflict and continues cutting rates, offering local market opportunities.

Kathy Hepworth

The dollar is supported by strong US growth but will likely weaken over time due to US debt dynamics, though it won't lose global prominence.

Kathy Hepworth

EM starting point is healthy with strong balance of payments, which supports currencies.

Kathy Hepworth

Policy responses in Indonesia and India raise concerns, but China is a stabilizing force for the region.

Kathy Hepworth

China's role in global trade and its large trade surpluses need watching; next week's US-China meeting is important.

Kathy Hepworth

The conflict is another chapter in a new world order; markets are overlooking medium/long-term impacts. Caution is warranted despite some risk-on sentiment.

Asked about EM Asia concerns given the energy complex.

Francine Lacqua

Kathy Hepworth

Policy responses in Indonesia and India raise concerns, but China is a stabilizing force for the region through growth.

Asked about concerns on China.

Francine Lacqua

Kathy Hepworth

China's role in global trade, especially its large trade surplus, needs watching as there will be responses. The US-China meeting next week is key.

Kathy Hepworth

Agrees with Sam that energy prices will be high for longer, impacting the global economy structurally. Markets are overlooking medium and long-term impacts. While some risk-on is warranted, caution is needed.

Kathy Hepworth

Markets are overlooking medium and long-term impacts of the conflict. While some risk-on is warranted, caution is needed.

SignalTube