Improving economic fundamentals may have made it appealing for investors to add exposure to Nigerian debt markets, according to Market Vectors’ fixed income portfolio managers Mike Mazier and Fran Rodilosso. They also noted that on Monday, October 1 st, the underlying index for the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), which they manage, added exposure to three Nigerian bonds. This marks the first time the fund and its index will count Nigeria among its country exposures. “I view this as a very significant development for EMLC and its index, since Nigeria is one of a handful of countries in sub-Sharan Africa that is well-positioned to offer significant opportunities to investors in the coming years as local capital markets continue to develop,” said Rodilosso. “The Central Bank of Nigeria’s relaxation of restrictions on foreign investor participation in the bond market has allowed EMLC to hold local bonds with competitive yields,” added Mazier. “Nigeria now represents approximately 3% of EMLC’s overall exposure.” Mazier also said that investments denominated in Nigerian naira, the country’s local currency, come with risks, including those from currency fluctuations, potentially destabilizing developments on the political front, and the fact that Nigeria’s economy is so closely tied to the oil markets. “The risks are very real, but it is also worth noting that investors in EMLC will be gaining exposure to Nigeria through a diversified portfolio rather than taking a concentrated position,” he added. “The recent history of Nigeria and other borrowers from the region has shown a relatively low correlation with other parts of the Emerging Markets world, making this a potentially appealing addition to EMLC and its underlying index.” Mr. Mazier and Mr. Rodilosso have more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. In addition to EMLC, they also manage six other Market Vectors taxable, fixed income ETFs: Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), International High Yield Bond ETF (NYSE Arca: IHY), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Renminbi Bond ETF (NYSE Arca: CHLC) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR). Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service.
Please note that the information herein represents the opinion of the author and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed.About Market Vectors ETFs Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $24.8 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of August 31, 2012. Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $33.9 billion in investor assets as of August 31, 2012. There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.
The Funds, as they invest in high yield securities, may also be subject to a greater risk of loss of income and principal than higher rated securities. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. The prices of high yield securities are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities. The secondary market for high yield securities may be less liquid than the market for higher quality securities and, as such, may have an adverse effect of market prices of certain securities. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.The “net asset value” (NAV) of an ETF is determined at the close of each business day, and represents the dollar value of one share of the ETF; it is calculated by taking the total assets of an ETF subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as an ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV. Total returns are based upon closing “market price” (price) of the ETF on the dates listed.
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