Fed Creates Mid-Term Risk in EM Asia Debt Markets: Silverdale 2019-08-01 00:45:16.366 GMT

By Hooyeon Kim

(Bloomberg) — Federal Reserve easing poses mid-term risk of creating bubbles in EM Asia debt markets, according to Sanjay Guglani, chief investment officer of a bond fund at Silverdale Capital Pte which manages $1 billion.

• “The Fed rate cut has demonstrated its willingness to be market dependent, rather than being truly economic data dependent.”

• This may embolden the market to push for more

• There are pockets of over-valuation in several emerging markets, although they may be relatively small

• In the current situation, a leveraged bond portfolio is likely to provide superior risk-adjusted returns; Silverdale has marginally increased duration, but it still adheres to high quality, investment grade, fixed-income securities

• Some Chinese credits have turned attractive in view of the ongoing U.S.-China trade war; Indian bonds are interesting given the widening credit spread due to a crisis in the nation’s non-banking financing sector

• The biggest risk for EM Asia is the U.S.-China trade war and the potential for currencies becoming a weapon during the trade dispute

• Silverdale has reduced exposure to Turkey this year; but Turkey is still worth closely watching

To contact the reporter on this story: Hooyeon Kim in Seoul at [email protected]
To contact the editors responsible for this story: Tan Hwee Ann at [email protected]
Brett Miller