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Wednesday, 29 June 2022

It might not be a bad time to get in on riskier EM bonds — if you know where to look

More investors are looking past frontier debt sell-offs for buying potential as rising yields tempt them to look past fears of default on junk-rated bonds, Bloomberg reports, citing investors. Even in the event of debt restructuring, frontier-market bonds will offer greater recovery values than current bond prices, asset managers told the business information service. “In some cases, [risk premiums] have been pricing in way below recovery levels,” one analyst said. “I’m not saying all of these credits will survive but some surely will. Being selective in that space clearly offers value.” High coupon rates mean attractive total returns even if bond prices prove volatile, analysts say.

Egypt is still attractive: “The selloff has created buying [potential] … in Egypt and Kenya, where the rise in yields has outstripped fundamentals,” one economist said.

ALSO FROM PLANET FINANCE-

  • Could BRICS get BRICSIA? Iran and Argentina have applied to become members of the EM organization BRICS, which includes Brazil, Russia, India, China and South Africa. (Reuters)
  • Sri Lanka in recession? The Sri Lankan economy fell into contraction in 1Q2022, recording a 1.6% decline, as the economy reels from red-hot inflation and years of mounting debt. (Statement, pdf).
  • Signs of a deepening crypto winter: Prominent crypto hedge fund Three Arrows Capital (3AC) has defaulted on a USD 670 mn loan from Voyager Digital. (Press release)

Down

EGX30

9,180

-0.8% (YTD: -23.2%)

Up

USD (CBE)

Buy 18.73

Sell 18.81

Up

USD at CIB

Buy 18.75

Sell 18.81

None

Interest rates CBE

11.25% deposit

12.25% lending

Up

Tadawul

11,671

+2.1% (YTD: +3.5%)

Up

ADX

9,443

+1.9% (YTD: +11.3%)

Up

DFM

3,253

+1.1% (YTD: +1.8%)

Down

S&P 500

3,822

-2.0% (YTD: -19.8%)

Up

FTSE 100

7,323

+0.9% (YTD: -0.8%)

Up

Euro Stoxx 50

3,549

+0.3% (YTD: -17.4%)

Up

Brent crude

USD 118.59

+0.5%

Up

Natural gas (Nymex)

USD 6.55

+0.8%

Down

Gold

USD 1,820.00

-0.1%

Down

BTC

USD 20,293

-2.1% (YTD: -56.1%)

THE CLOSING BELL-

The EGX30 fell 0.8% at yesterday’s close on turnover of EGP 861 mn (3.9% above the 90-day average). Local investors were net buyers. The index is down 23.2% YTD.

In the green: GB Auto (+5.4%), Orascom Development Egypt (+3.4%) and Heliopolis Housing (+2.3%).

In the red: Elsewedy Electric (-6.3%), Ezz Steel (-5.5%) and Sidi Kerir Petrochemicals (-5.1%).

Asian markets are in the red across the board in early trading this morning. Futures suggest a more mixed picture for European indices when they open later on today, while Wall Street looks set to start in the green.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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