Weekly Market Update – 24.01.2019

Weekly Market Update – 24.01.2019


Global slowdown but Latin America should recover in 2019 and 2020

  • Before the opening of the WEF the IMF used to global platform to update its global growth outlook. It is the 2nd time in three months that the global growth forecast was reduced by 0.2%.
  • Globally GDP is expected to grow at around 3.5% in 2019 which is still a good pace but lower than in 2018. The good news for emerging market bond investors is that Emerging markets will continue to growth at around 4.5% outpacing the rest of the world.
  • While China grew 6.4% in Q4 and continues to slow down South America is expected to recover over the next two years. From a low GDP growth of 1.1 percent in 2018 to 2.0 percent in 2019 and 2.5 percent in 2020.
  • These are compared with Asia low figures, but compared to its recent history this is good news for the economy and for corporates.
  • Over the last month we have seen in Latin America a spread tightening which resulted in positive returns for bond investors.
  • We expect that bonds from South American companies will continue to perform well in 2019.



  • Generally speaking the negative IMF global growth outlook is good news for Emerging Market hard currency bonds. It forces the FED to be cautions with further rate hikes, which puts pressure on the overvalued US dollar.
  • We expect that the dollar will depreciate over the coming months which comes as a  tailwind for emerging market economies.
  • The biggest risk to this positive outlook comes from the political side. Trade war, Brexit, protest in France, a fiscal deficit in Italy are just some of them.
  • We still believe that the ECB and the FED might if needed flood the market with liquidity, i.e. a “Powell and Draghi put”.
  • Fiscal stimulus is another source for positive surprises. China has decided to help the economy with public spending, the UK might be forced to do similar things in spring and the American president will as well try to stimulate the economy with further tax reductions.
  • Overall this will hinder rates from rising and therefore we can collect attractive coupons which the market offers at the moment.


Bonds Covered
UniCredit S.p.A. 6.572 2022 (UniCredit S.p.A. 2022 6.572)
Atento Luxco 6.125 2022 (Atento Luxco 2022 6.125)
Credito Real 7.25 2023 (Credito Real 2023 7.25)
Tecnoglass 8.2 2022 (Tecnoglass 2022 8.2)



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