Flights to Kazakhstan, Uzbekistan, Moldova, and Kyrgyzstan used to be sparsely filled by mining engineers or backpacking tourists. Since the start of this year, the passengers have been just as likely to include hedge fund analysts in red braces checking out what they have identified as the next hot opportunity in emerging markets.
Their attention has shifted from eastern Europe, where fixed-income yields have been narrowing across almost all the region's debt markets. Even Russian GKOs, one of the world's best-kept secrets last year when their yields topped 200%, now pay under 20% in rouble terms. Dollar-hedged GKO structured products - which take care of currency, custody, clearing and foreign ownership restrictions all in one - are barely showing a double-digit yield. Bulgarian T-bills and zunk bonds, the best performers in the emerging-market universe in the second quarter of 1997, are now so over-priced that some speculators have begun to...
