September 2005
East or west, why local currency is best
Emerging-market and convergence investors have long since stopped buying hard-currency debt from the new European countries after their spreads converged with EU government levels, but the region's local-currency debt is attracting ever more inflows. Kathryn Wells reports on where the
best opportunities lie
|
|
Perasso: local-currency
investors need good
knowledge of borrowers'
political and economic
systems
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PUT A GROUP of analysts and traders together and you can be pretty certain to find disagreement on virtually any topic you care to mention.
Not so at emerging-market trade body Emta's summer forum in London at the end of June, where investors in emerging markets showed a remarkable consensus in their preference for opportunities in local-currency bonds over external debt.
This evolution away from paper denominated in hard currency in favour of issues in zloty, peso and won has been a gradual process and shows few signs of being a passing trend. It widens investor bases in these markets, and provides governments with borrowing that is free of currency risk – always something of a holy grail in a country's fund-raising efforts.
The issue of different investor bases is especially relevant in central and eastern Europe,...
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