Opportunities continue to exist in Latin American debt despite negative news coming from the region, according to Market Vectors’ fixed income portfolio manager Fran Rodilosso. “If you just read the headlines, you might surmise that Latin American countries are presenting the debt markets with multiple reasons to be concerned,” said Rodilosso. “But, bad news can also bring opportunity.” Rodilosso pointed to a handful of what he termed “discouraging recent developments” that seem to be clouding market sentiment, including Venezuela’s re-election of Hugo Chavez and the Vitro bankruptcy proceedings that took place in Mexico earlier this year. “Each of these events has received a great deal of negative attention,” he continued. “But you can see silver linings. One includes the fact that Venezuela has continued to exhibit a willingness to pay the high rates demanded by the market during the nearly 14 years of the Chavez regime. Also, Mexico has made significant economic gains in recent years, making it far more competitive with China as a global manufacturing hub. There are a large number of Mexican corporate bond issuers that are benefitting.” Rodilosso noted a recent uptick in volatility in several Latin American public and private debt markets driven by specific events, but he also sees factors that moderate his concerns. “While volatility has certainly made its presence felt in recent months in many countries, there are many of what I would call ‘un-emerging market’ forces at work at the same time. Low debt-to-GDP ratios, high FX reserves and a long list of private sector borrowers have shown the ability and willingness to continue servicing their debt throughout the economic and credit cycle,” he said. Rodilosso also added that he and his colleagues see a number of opportunities in local currency debt in countries, such as Mexico and Uruguay, and in some of the corporate debt available in Mexico and Brazil. Brazil has seen its own negative headlines around tepid growth figures and the liquidation of a second-tier bank with a significant amount of bonds outstanding. “Brazil is certainly one of those markets where we think bad news may allow investors to find credit opportunities,” said Rodilosso.
Mr. Rodilosso has more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. Among the Market Vectors ETFs under his watch are LatAm Aggregate Bond ETF (NYSE Arca: BONO) and Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), which each count Mexico and Brazil among their largest country exposures. He also manages five other fixed income ETFs: Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), International High Yield Bond ETF (NYSE Arca: IHY), Renminbi Bond ETF (NYSE Arca: CHLC), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR). As of October 31, 2012, the total assets for these ETFs amounted to approximately $1.2 billion.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 $27.9 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of September 30, 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 $37.8 billion in investor assets as of September 30, 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.
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