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EMTA Investor Forum in Boston - April 1

Wednesday, April 1, 2015 

Sponsored by


3:30 p.m. Registration

4:00 p.m. Panel Discussion
Investor Views on EM Challenges and Opportunities
Alejandro Estevez-Breton (Santander) – Moderator
Michael Cirami (Eaton Vance)
Heather Hagerty (Fidelity Investments)

Tom Cooper (GMO)
Alex Kozhemiakin (Standish)

5:00 p.m. Cocktail Reception 

Additional support provided by Santander.  

Registration fee for EMTA Members: US$75 / US$695 for non-members.



Importance of Reforms and Liquidity Debated at EMTA Investor Forum in Boston

Approximately 85 EM market participants attended EMTA’s Investor Forum in Boston, held on Wednesday, April 1, 2015.  The event was sponsored by MarketAxess, with additional support provided by Santander.

Alejandro Estevez-Breton (Santander) moderated the session through a discussion of global trends, as well as challenges for, and opportunities, in EM.  In his introduction, Estevez-Breton highlighted the divergence theme between EM and DM, with EM growth decelerating vs. DM acceleration, US rate tightening vs. easing at most other Central Banks and the ‘winners’ and ‘losers’ of the oil price decline . Given such recent developments, it was impossible to pick an absolute bottom in the recent EM sell-off, and “it isn’t over yet,” according to Tom Cooper (Grantham Mayo and an EMTA Board Member).

Heather Hagerty (Fidelity) discussed the US rate outlook, which she considered unclear.  “The dots have come down, as they should, because the data has disappointed.  Weather clearly has something to do with the poor Q1 economic data, but how severe of an impact the USD has had is what concerns me.”

Alex Kozhemiakin (Standish Mellon) argued that sanctions on Russia were unlikely to escalate.  “The West doesn’t have the stomach for sanctions that really bite; it reminds me of my own ineffective parenting skills as a father of four!” he lamented.  In Kozhemiakin’s view, greater pain had been inflicted on Russia by the decline in oil pricing.  In response, Moscow has prudently devalued the ruble, “and President Putin has been able to do so without a dent to his popularity at home by convincing many Russians that the weaker Ruble is due to Western aggression.”  Kozhemiakin didn’t anticipate Russia shaking its dependence on oil exports.

The slowdown in global trade and capital flows was also addressed.  Estevez-Breton noted that intra–EM trade could be depressed by increased vertical integration in China, as well as by the move to regional free trade agreements rather than global treaties.  Eaton Vance’s Michael Cirami observed that much soul-searching for a new growth model was occurring in EM countries in the post-Washington Consensus era.  Getting the right policy mix was a challenge for EM countries, and the emphasis on consumption-led growth and away from export-led growth was, in his assessment, a good decision.

Hagerty and Kozhemiakin discussed the importance of liquidity.  “As a crossover investor, liquidity is paramount for me,” Hagerty stated, while in Kozhemiakin’s view liquidity was an important, but not supreme, factor in investment decisions.  “Liquidity has evaporated, but not just in EM, it has dried up in other markets like High-Yield as well,” he added.

The panel reviewed whether markets had been too sanguine in their assessment of reform prospects for countries such as Mexico.  “I’m not disappointed at all in Mexico’s reforms,” Hagerty declared, and ruled out any backtracking on energy sector liberalization.  She argued that the current administration remained committed to implementing energy sector reforms despite low approval ratings, and that Mexico deserved to be an A-rated country.

Cirami underscored that countries implementing economic reforms were welcome in his portfolio, and added India and Serbia (“local debt, not the greatly overvalued external debt”) as potential buys.  In contrast, Cooper affirmed that “India’s spreads are so tight, it’s hard to get excited about it; there is so much room for improvement and so much risk of backsliding.”

Finally, speakers assessed a number of additional EM credits.  Kozhemiakin saw the chance of a downgrade of Brazil at 30%, and “didn’t see much value” in Ukraine which he noted he hadn’t owned for two years.  Cooper viewed Venezuela as “a train wreck…but the bonds have gone as low as they can before a default…so there is a lot of upside if they pay.”