Connect with us

Spread & Containment

EM Debt 2024: Solid Beginnings

Emerging markets (EM) debt performed well in the first quarter of 2024, and we anticipate more of the same in the next quarter, thanks to a benign global…

Published

14 mins ago

on

Emerging markets (EM) debt performed well in the first quarter of 2024, and we anticipate more of the same in the next quarter, thanks to a benign global macro backdrop, solid EM credit fundamentals, improving technical conditions, and still-decent valuations.

We continue to believe that there are attractive opportunities for investors to increase exposure to long-duration securities to lock in attractive real and nominal yields.

Despite strong performance this year, we also see selective value in high-beta, high-yield credit because we believe the global market environment will be conducive to its outperformance.

We also continue see scope for fundamental differentiation and prefer countries with easier access to multilateral and bilateral funding (including frontier and distressed credit).

Meanwhile, the corporate credit space continues to exhibit a combination of differentiated fundamental drivers, favorable supply technical conditions, and attractive relative valuations to select sovereign curves. We are seeking investment opportunities where corporate credit fundamentals and attractive spreads coincide. Short-maturity bonds have outperformed, but opportunities in longer bonds are appearing. We continue to focus on issuers with low refinancing needs, robust balance sheets, and positive credit trajectories.

Below, we break down some of our largest active positions by beta bucket, which is how we allocate our risk budget.

A View of the Potential Opportunities: Overweight/Underweight

High-Beta Bucket

In the high-beta bucket, our largest overweight positions are in Egypt, Ukraine, and Ghana, and our largest underweight positions are in Rwanda, Kenya, and Nigeria.

Egypt (overweight): Significant external financing—which was unlocked through the recently announced International Monetary Fund (IMF) package and foreign direct investment (FDI) deal—is more than adequate to meet Egypt’s needs. The external sector could also prove resilient following the sharp depreciation of the Egyptian pound. We also believe there is room for further spread compression toward peers in the high-beta bucket and curve steepening.

Ukraine’s potential restructuring could be more favorable to eurobond holders than previously anticipated.

Ukraine (overweight): We have increased our overweight based on a potential restructuring that we have interpreted as more favorable for eurobond holders than previously anticipated. Multilateral and bilateral support also remains strong.

Ghana (overweight): We believe the restructuring process is regaining momentum. The prospect of lower core rates and the rally in high-yield names could support recovery values.

Rwanda (underweight): Imbalances in the external sector and unattractive valuations make Rwanda vulnerable.

Kenya (underweight): Spreads have tightened to levels at which we believe there is better value in other high-beta names.

Nigera (underweight): Valuations are tight relative to peers.

Medium-Beta Bucket

In the medium-beta bucket, our largest overweight positions are in Ivory Coast, Guatemala, and Benin, and our largest underweight positions are in Bahrain, Romania, and Dominican Republic.

Ivory Coast (overweight): We believe valuations are favorable relative to peers. The country’s debt is also supported by strong fundamentals and support from development partners, including the IMF. We also believe Senegal’s peaceful post-election political transition will bolster confidence in the Ivory Coast’s political process ahead of its own elections next year.

Benin (overweight): We believe the country’s bonds will continue to be supported by strong fundamental performance and prudent macroeconomic policies. The country will also receive further support from the IMF under the Resilience and Sustainability Facility in late 2024.

Guatemala (overweight): Macroeconomic conditions are strong and valuations are attractive, and although President Bernardo Arévalo will likely face political obstacles, we believe strong leverage ratios and low fiscal deficits will keep Guatemala a strong credit.

Dominican Republic’s valuations are at their tightest levels since 2007.

Bahrain (underweight): Weak fiscal reform efforts, a deterioration in regional geopolitical risks, and tight valuations make us cautious.

Romania (underweight): We are concerned about deteriorating fiscal risks and political noise ahead of this year’s elections. Romania has already been a prolific issuer this year and is running the risk of an abundance of supply.

Dominican Republic (underweight): Although fundamentals continue to be among the strongest in the region, valuations are at their tightest levels since 2007.

Low-Beta Bucket

In the low-beta bucket, our largest overweight positions are in Saudi Arabia, Bermuda, and Paraguay and our largest underweight positions are in Poland, Uruguay, and Indonesia.

Saudi Arabia (overweight): Efforts to diversify the economy away from the energy sector remain largely on track. Oil prices are supportive of the current investment spend, and we see value in Saudi Arabia relative to some of its regional peers.

We believe Paraguay is on an improving fundamental trajectory.

Bermuda (overweight): Bermuda’s bonds have similar valuations to those of Peru and Chile, but we believe the country has a stronger fundamental trajectory with less institutional uncertainty.

Paraguay (overweight): Although Paraguay has lagged year-to-date, we believe the country is on an improving fundamental trajectory and has attractive valuations for the low-beta bucket.

Poland (underweight): Although the medium-term policy framework looks more favorable under the new government, we remain cautious near term due to an increase in political noise following last year’s elections.

Uruguay (underweight): Credit fundamentals in Uruguay remain strong, but bond prices have compressed materially since the COVID-19 pandemic, and we believe this results in limited scope for additional spread tightening.

Indonesia (underweight): Valuations are unappealing. The country’s fundamental outlook became murkier after presidential elections in February, and there is risk of fiscal slippage should the new government increase spending. In addition, a slowdown in the windfall from commodity exports and a persistently strong U.S. dollar could weaken external positions.

Marco Ruijer, CFA, is a portfolio manager on William Blair’s emerging markets debt team.

Want more insights on the economy and investment landscape? Subscribe to our blog.

The post EM Debt 2024: Solid Beginnings appeared first on William Blair.

Read More

Related Topics:
Continue Reading

Spread & Containment

Popular national restaurant chain explores Chapter 11 bankruptcy

The chain has suffered since the Covid pandemic and it may need financial help to have a chance to survive.

Published

44 mins ago

on

April 17, 2024

By

The Covid pandemic helped restaurant chains with the infrastructure needed to pivot to delivery, pickup, and drive-through. McDonald's, Domino's, and Chipotle thrived, for example, because they had been investing in technology for years.

Those chains also have food that people are used to eating at home. Traditional sit-down restaurants tried to make the pivot to delivery, but customers did not necessarily want to pay sit-down prices to eat at home and some food travels better than others.

McDonald's menu adds two new sandwiches nationwide

Related: McDonald's menu adds two new sandwiches nationwide

For some chains, the Covid lockdown period came with a huge slowdown in business. The recovery, in many cases, was also slow, and recent months have shown some Americans being less willing to dine out.

You can blame inflation or just general economic concerns but some chains have not recovered to the level necessary to service the added debt they took on during the shutdown period. Add in that labor prices have pushed higher and some food items cost more and it creates a very difficult operating situation.

Burger King lost hundreds of restaurants across multiple franchisees and Boston Market has dwindled to a handful of stores. Now, another huge national brand has hired a consulting firm to consider a possible Chapter 11 bankruptcy filing.

Some restaurant chains have continued to struggle.

Image source: Shutterstock

Red Lobster has struggled

Red Lobster has a proud history and, in many ways, it brought lobster and seafood to markets where it otherwise was only offered in fine-dining experiences.

"Before there was Red Lobster, there was Bill Darden, a man passionate about making delicious, high-quality seafood available and affordable to everyone, including people who lived far from the coast and regardless of race, gender, religion, or economic means. What was once a single, family-owned restaurant in Lakeland, Florida, now has over 700 locations around the world," the company shared on its website.

The chain has been owned by Thai Union Group, which wrote down its stake in the company earlier this year.

“During the past years, the combination of Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted to Red Lobster business resulting in prolonged negative financial contributions to the company and its shareholders,” Thai Union said in a Jan. 16 media release. “...After detailed analysis, the board of directors has determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore the company is pursuing an exit of the minority investment.”

Red Lobster considers its options

The seafood chain hurt its financial position by offering its popular all-you-can-eat shrimp meal for $20. That worked to increase traffic, but it was a money loser for the chain. That deal remains on the menu, but it now costs $25.  

It's a situation that has the chain looking for a lifeline.

"Red Lobster has been getting advice from law firm King & Spalding, said the people, who asked not to be identified discussing a private matter. The dining chain is considering a possible Chapter 11 filing to shed some long-term contracts and renegotiate a swath of leases, the people said," Bloomberg reported.

Fortress Investment Group, the company's top lender, has been involved in the Chapter 11 discussions, according to the news service. 

Red Lobster recently changed CEOs. Horace Dawson stepped down and retired. Jonathan Tibus, managing director of management consultant Alvarez & Marsal. Tibus is considered a turnaround expert who helped Kona Grill and Krystal through their Chapter 11 bankruptcy filings.

Read More

Continue Reading

Spread & Containment

Why Run?

Why Run?

“It’s the perfect sport for a pandemic,” The New York Times wrote in 2021, explaining the surge in popularity of running…

Published

5 hours ago

on

April 17, 2024

By

Why Run?

“It’s the perfect sport for a pandemic,” The New York Times wrote in 2021, explaining the surge in popularity of running in the face of Covid-19 restrictions.

“All you need is a pair of shoes and a six-foot buffer from the next person,” the author Talya Minsberg described what she called a “back-to-basics exercise boom”.

With gym closures and restrictions on indoor activities and team sports, people turned to outdoor exercise as a safe and accessible way to stay active and maintain their physical and mental well-being.

Running offered a sense of freedom, a chance to escape the confines of home, and an opportunity to connect with nature amidst lockdowns and social distancing measures.

And while Covid-19 restrictions have long been lifted, many pandemic runners have kept at it, thanks to the addictive nature of a sport often belittled as boring and repetitive. According to a 2023 survey of roughly 4,000 active runners conducted by RunRepeat, almost 30 percent of the respondents started running during the pandemic.

So what is it that motivates runners to tie their laces several times a week? Beyond the immediate health benefits, the motivation to run often stems from a desire for personal challenge, stress relief and the pursuit of fitness goals. As Statista's Felix Richter shows in the chart below, based on survey data from Running USA, shows, staying in shape and healthy is by far the most-cited reason to run in the post-pandemic world, followed at quite some distance by stress relief and simply enjoyment.

You will find more infographics at Statista

Whether it's training for a race, improving cardiovascular health or simply enjoying the hypnotic rhythm of footfalls on pavement, running has become a cornerstone of many people's daily routines, fostering a global community united by a shared passion for movement, fresh air and athletic achievement.

Tyler Durden Wed, 04/17/2024 - 04:15

Read More

Continue Reading

Spread & Containment

Real-time detection of infectious disease viruses by searching for molecular fingerprinting

A research team consisting of Professor Kyoung-Duck Park and Taeyoung Moon and Huitae Joo, PhD candidates, from the Department of Physics at Pohang University…

Published

13 hours ago

on

April 16, 2024

By

A research team consisting of Professor Kyoung-Duck Park and Taeyoung Moon and Huitae Joo, PhD candidates, from the Department of Physics at Pohang University of Science and Technology (POSTECH) has engineered “broadband nanogap gold spectroscopic sensor” using a flexible material capable of bending to create a controlled gap. With the developed technology, it is possible to rapidly test various types of materials, including infectious disease viruses, using only a single nano-spectroscopic sensor to find molecular fingerprints.

Credit: POSTECH

A research team consisting of Professor Kyoung-Duck Park and Taeyoung Moon and Huitae Joo, PhD candidates, from the Department of Physics at Pohang University of Science and Technology (POSTECH) has engineered “broadband nanogap gold spectroscopic sensor” using a flexible material capable of bending to create a controlled gap. With the developed technology, it is possible to rapidly test various types of materials, including infectious disease viruses, using only a single nano-spectroscopic sensor to find molecular fingerprints.

 

The emergence of pandemic epidemics like COVID-19 has emphasized the necessity for rapid and precise analytical methods to prepare for potential future virus outbreaks. Raman spectroscopy, using gold nanostructures, offers information about the internal structure and chemical properties of materials by analyzing the distinct vibrations of molecules known as “molecular fingerprints,” using light with remarkable sensitivity. Therefore, it could play a crucial role in determining the positivity of a virus.

However, conventional high-sensitivity Raman spectroscopy sensors detect only one type of virus with a single device, thus posing limitations in terms of productivity, detection speed, and cost when considering clinical applications.

 

The research team successfully fabricated a one-dimensional structure at the millimeter scale, featuring gold nanogaps accommodating only a single molecule with a tight fit. This advancement enables large-area, high-sensitivity Raman spectroscopic sensing. Furthermore, they effectively integrated flexible materials onto the substrate of the gold nanogap spectroscopic sensor. Finally, the team developed a source technology for a broadband active nano-spectral sensor, allowing tailored detection of specific substances using a single device, by widening the nanogap to the size of a virus and freely adjusting its width to suit the size and type of materials, including viruses.

 

Furthermore, they improved the sensitivity and controllability of the sensor by combining adaptive optics technology used in fields such as space optics, such as the James Webb Telescope. Additionally, they established a conceptual model for extending the fabricated one-dimensional structure into a two-dimensional spectroscopic sensor, theoretically confirming the ability to amplify Raman spectroscopic signals by up to several billion times. In other words, it becomes possible to confirm the positivity of viruses in real-time within seconds, a process that previously took days for verification.

 

The achievements of the research team, currently pending patent approval, are expected to be utilized for the rapid response through high-sensitivity real-time testing in the event of unexpected infectious diseases such as COVID-19, to prevent indiscriminate spread. Taeyoung Moon, lead author of the paper, emphasized the significance of their achievement by stating, “This not only advances basic scientific research in identifying unique properties of materials from molecules to viruses but also facilitates practical applications, enabling rapid detection of a broad spectrum of emerging viruses using a single, tailored sensor.”

 

The collaborative research was jointly conducted with Professor Dai-Sik Kim’s team from UNIST’s Department of Physics and a team led by Professor Yung Doug Suh from UNIST’s Department of Chemistry who is Deputy Director of Center for Multidimensional Carbon Materials at the Institute for Basic Science (IBS). Additionally, Yeonjeong Koo, Mingu Kang, and Hyeongwoo Lee from POSTECH’s Department of Physics carried out measurements. The research findings have recently been published in the international journal Nano Letters.

Journal

Nano Letters

DOI

10.1021/acs.nanolett.4c00289

Article Title

Adaptive Gap-Tunable Surface-Enhanced Raman Spectroscopy

Article Publication Date

28-Mar-2024

Read More

Continue Reading

Trending