20131024-巴黎银行证券-EM_ASW_Monitor_15页_1mb

EM STRATEGY Summary

Core Content

This document provides an analysis of Asset Swap (ASW) yields for various emerging market (EM) bond markets, focusing on the relative value of local and foreign currency bonds. It evaluates the best investment opportunities based on the spread between bond yields and FX swap rates, highlighting which bonds offer the most value for both local and foreign investors.

Main Points and Key Information

CEEMEA Region

• CZGBs (Czech Republic):
  • The only local currency bond market that is cheaper than external debt.
  • CZGB 09/22 is highlighted as a top pick for both local and foreign investors.
  • HGBs (Hungary):
    • The cheapest bonds in the liquid EM space for both local and foreign investors.
    • External debt offers even better value than HGBs.
  • SAGBs (South Africa):
    • Rich from both local and foreign investor perspectives.
    • The tight basis does not attract inflows from FX-hedging investors.
  • ILGOVs (Israel):
    • Offer significantly less return than external credit or selling protection on external credit.
  • THAIGBs (Thailand):
    • Rich for both local and foreign investors.
    • Extremely light supply for FY2014 means they will remain expensive.

ASIA Region

• Korea and Malaysia:
  • Front-end local-currency bonds offer the best value when swapped to 3-month USD Libor.
  • The ASW term structure is inverted for both countries.
  • Overall, front-end bonds in Korea are favored.
• Thailand:
  • THAIGBs are rich for both local and foreign investors.
  • Light supply for FY2014 keeps them expensive.
• Singapore:
  • ASW and $ASW curves steepen from 5-year tenor onwards.
  • The 7-year tenor is seen as relatively cheap on both ASW and $ASW bases.

LATAM Region

• Mbonos (Mexico):
  • The long-end of the curve is tighter than the short-end, reflecting market appetite for duration extension.
• Brazil NTF:
  • Some value at the front end of the curve (up to Jan15), but backend value is eroded in both ASW and $ASW terms.
• COLTES (Colombia):
  • Distorted by local positions and liquidity constraints.
  • Offers the most value in 3-month FX forward-hedged terms.

Tables and Charts

Table 1: ASW Ranking of 5y Benchmarks

• CZGB 5 11/04/19 56 has the lowest ASW at 62 bp.
• SAGB 8 21/12/18 R204 has the lowest $ASW at 1.17%.
• SIGB 4 01/09/18 has a negative ASW (-1 bp) and $ASW at 1.02%.
• ILGOV 6 28/02/19 has the lowest ASW (-27 bp) and $ASW at 1.86%.

Charts

• Chart 1: 3m FX hedged 5y benchmark yield.
• Chart 2-6: Regional ASW curves for Poland, Hungary, South Africa, Czech Republic, and Israel.
• Chart 7: Turkey ASW curves.
• Chart 8-11: ASW curves for South Korea, Thailand, Malaysia, and Singapore.
• Chart 12-15: ASW curves for Mexico, Brazil, Colombia, and Chile.
• Chart 16-21: ASW evolution charts for CEEMEA, ASIA, and LATAM regions.

Regional Analysis Summary

CEEMEA

• The Czech Republic is the only market where local-currency bonds are cheaper than external debt.
• HGBs are the cheapest bonds in the liquid EM space, but external debt offers better value.
• SAGBs are rich, and the tight basis does not attract FX-hedging investors.
• ILGOVs are less attractive compared to external credit or selling protection.

ASIA

• Korea and Malaysia's front-end local-currency bonds are the most valuable when swapped to 3-month USD Libor.
• Thailand's bonds are rich and will remain expensive due to low supply.
• Singapore's ASW and $ASW curves steepen from 5-year tenor onwards, with the 7-year tenor being relatively cheap.

LATAM

• Mexico's Mbonos show tighter levels at the long-end, indicating demand for longer duration bonds.
• Brazil's NTF curve shows value at the front end but erosion at the backend.
• Colombia's COLTES curve is distorted but offers the most value in FX forward-hedged terms.

Key Investment Insights

• The document emphasizes the importance of considering FX hedging when evaluating bond investments.
• It suggests that certain bonds in specific markets offer better value than others based on ASW spreads.
• Investors are advised to focus on front-end bonds in Korea and Malaysia, and on the 7-year tenor in Singapore.
• The Czech Republic and South Africa are highlighted for their specific bond opportunities.
• The document also notes the impact of supply and demand on bond valuations, particularly in Thailand and Colombia.