EM investors ponder Trump presidency; oil prices stay on radar screens; Kexim plans notes

By Christine Van Dusen

Atlanta, Nov. 16 – The tone was cautious on Wednesday as oil prices remained a concern and emerging markets investors continued to wonder what a Donald Trump presidency will mean for the asset class.

“Market sentiment has turned more cautious, given the U.S. election outcome, the expected Fed rate hike in December and low oil prices,” a London-based analyst said. “Trump’s win has undeniably raised substantial uncertainties. Most notably, EM credit markets have been on a rout after markets started to price in a more aggressive fiscal spending agenda under a Trump administration.”

While Trump’s agenda “might promote growth, investors remain wary [of] higher borrowing costs for EM on higher rates and potential trade barriers that might offset any gains from a spending boost,” he said. “Other than that, markets are currently wondering what effect such an agenda would have on monetary policy, although a hike in December is seen as almost certain.”

Oil prices remained on radar screens.

“While recent comments continue to reiterate OPEC’s willingness to cut production levels, investors remain somewhat wary whether its members will be able to seize a deal on Nov. 30 and whether other producers outside the bloc would join such an agreement,” the analyst said.

Looking to the Middle East, banks were trading at a premium over lenders from other regions, including North America, the analyst said.

“This is, however, justifiable given the high oil dependency in the [Gulf region], that has caused a marked slowdown in the region, and the expected ongoing issue pipeline going into next year,” he said. “We therefore don’t think that [Gulf region] bonds are per se attractive, but a number of attractive investment opportunities still exist.”

Ukraine higher amid demand

From Ukraine, bonds have seen some demand so far this week, said Svitlana Rusakova of Dragon Capital (Cyprus) Ltd.

“Demand at this stage is quite differentiated, concentrating in the pockets where the market sees better value, which for the moment is the short-end sovereign and some quasi-sovereigns,” she said.

Those notes were seen moving up one point, she said.

Kexim to issue notes

In deal-related news, the Export-Import Bank of Korea (Kexim) is planning to issue dollar-denominated floating-rate notes, according to a company filing.

Goldman Sachs is the bookrunner for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general operations.

The lender is based in Seoul.

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