Posted inEmerging MarketsSOUTHERN EUROPE

Catalan fund selectors cast their eyes on em

On a Pan-European basis, emerging market equities are not anymore as popular as a couple of months ago, but sentiment stays on the positive side by a big margin. Some 44% of Barcelona-based fund buyers plan to increase exposure, while only 3% will cut down their allocation to the asset class. However, generally in Europe the share of fund selectors planning to keep their holdings untouched has come up consistently towards the end of the year. This is the case for Barcelona too: 47% of respondents say they will stick to their current allocation. For Asian equities, a similar picture applies, though sentiment is a bit more outspoken here with a few more buyers as well as sellers.

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EMD enthusiasts

Some may fear dollar-denominated emerging market debt may suffer this year from the strong dollar, Barcelona’s fund selectors clearly don’t. And why should they actually: over the past three months, many emerging market currencies lost some value against the dollar, but they appreciated versus the euro (see graph below).

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Corporate debt, typically issued in dollars, is even more popular than government bonds. Some 36% plan to alt=''increase exposure to both asset classes, well above the Pan-European average of 24%. Still, sentiment is net negative for government bonds as more than a quarter of respondents is not invested in the asset class, and only net neutral for their corporate equivalents. 

[image_library_tag 0352a229-1af8-4971-8cce-5addad0943f4 227×218 ” style=”color: rgb(51, 51, 51); font-family: ‘Segoe UI’, sans-serif; font-size: 13px; float: left; margin: 5px; background-color: rgb(255, 255, 255);” title=”barcaq4_14_emgov.jpg” ]However, overall enthusiasm for emerging market debt is much higher than in February 2014, when more than half of Catalan fund selectors were either not invested in the asset class or were looking to decrease their allocation. The contrast with other fixed income is also striking: developed market bonds have no or almost no buyers, and the same goes for high yield.

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