Bloomberg News

Top Taiwan Fund Buying Higher-Yielding Europe Debt on ECB Cash

February 15, 2012

Feb. 14 (Bloomberg) -- Taiwan’s best-performing debt fund is buying Russian, Romanian and Turkish government bonds as the European Central Bank’s injection of funds into lenders helps ward off a cash crunch.

Bryan Wang, who manages NT$6.1 billion ($207 million) of assets as a manager at Fuh Hwa Securities Investment Trust Co., said he added the securities to this year. His Emerging Markets High-Yield Fixed-Income Fund returned 7.9 percent in 2012, the most of 115 debt funds in Taiwan tracked by Bloomberg.

“If you look at the portfolios of major European banks, they have a lot of exposure in Eastern Europe,” Taipei-based Wang said in an interview yesterday. “Since the ECB is injecting funds into European banks, the money will flow into these countries, driving bond rallies.”

The ECB loaned 523 lenders a record 489 billion euros ($644 billion) for the next three years in December. Turkish and Russian 10-year bonds yielded 9.64 percent and 8.23 percent, compared with 8.54 percent for India’s 10-year debt, the highest among Asia’s major emerging markets. Wang said he expected returns on Russian, Romanian and Turkish debt to surpass those on Asian sovereign bonds this year.

Turkey’s local-currency debt has gained 3.2 percent in 2012, while Russian securities rallied 2.9 percent, JPMorgan Chase & Co. indexes show. Yields on Romanian five-year notes dropped 38 basis points, or 0.38 percentage point, to 5.61 percent on Feb. 10, according to data compiled by Bloomberg. Asian sovereign bonds have returned 4.5 percent, HSBC Holdings Plc indexes show.

Turkish Rebound

Turkish inflation was 10.6 percent in January and central bank Governor Erdem Basci forecast this month the rate would decline to 6.5 percent by year-end. Ten-year Turkish yields jumped 135 basis points in 2011 as the lira tumbled 19 percent, before rebounding 9.1 percent this year.

“The debt got beaten up too much when economic prospects worsened,” Wang said. “It’s time for a rebound,” he said, adding it was rare to see yields of more than 9 percent for an economy of that size.

Greek lawmakers approved budget cuts over the weekend needed to secure an international bailout. Wang said he expected policy makers will find a solution to Europe’s debt crisis and rallies in the region’s bonds won’t be temporary.

“I’m fairly optimistic the European Union will end up finding a solution to its current turmoil,” he said.

--Editors: Andrew Janes, James Regan

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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