EM Recommendations

- "So far, the emerging markets have done very well in 2010. The benchmarks for both hard- (EMBI) and local- (GBI) currency bonds posted positive returns; EMBI and GBI posted returns of 5.56% and 18.83%, respectively, for the first six months of 2010. We are still positive about the asset class, although we do not expect the second half of the year to proceed at the same pace as the first half. We admit that the ongoing turmoil in relation to the debt problems of the euro zone constitutes a risk, particularly for the Eastern European countries. The public debt and budget deficits of the emerging-market countries are generally much lower. Therefore the emerging-market countries are not nearly as vulnerable as the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain). For the short term, however, there is a risk that Eastern Europe underperforms the other emergingmarket regions. Read more here. Provided that the cooperation between Greece and the EU/the IMF proceeds successfully, we see no reason to reduce exposure to emerging-market bonds. However, investors who overweight Central and Eastern Europe may consider reducing their exposure to the benefit of other emergingmarket regions. Investors should also take into consideration the mounting concern over global growth, the possibility of further intervention in the market (such as the 2 % tax in Brazil and Colombia’s sale of pesos), and the exit strategies from the very relaxed fiscal- and monetary policies pursued around the globe. This publication gives you an overview of our recommendations for local-currency bonds."
JyskeBank EM Recommendations 20100708