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Fasdal: Why I'm still bullish about EM bonds despite the risks

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June 24, 2014 10 year, bonds, bonds and equties, bonds market, cfd, cfd products, cfd trading, cfds, em bonds, emerging, emerging market, emerging market bond market, emerging market bonds, emerging markets, emerging markets bond markets, emergingmarkets, equity, equity strategy, europe, european, geopolitical, geopolitical tensions, geopolitics, german, index, iraq, iraq oil, lira, lira turkey, lira volatility, market, markets, saxo tv, simon fasdal, simon fasdal saxo, stocks, stocks markets, stocks v bonds, tradingfloor.com, ukraine, ukraine crisis
There’s been a lot of talk over the past few months about emerging market bonds and whether they are a better deal than stocks. Saxo’s head of fixed income, Simon Fasdal, says he’s still bullish about them but warns that the market is exposed to geopolitical risk factors particularly Iraq and Ukraine.
Fasdal believes that many are ignoring the instability that both of these countries may have on emerging and European markets. He points to the recent rise in oil prices due to the violence in Iraq and a small reaction in the Turkish Lira. But he says that other markets seem to be ignoring the threat level, at least for now. If there is further escalation, he continues, emerging markets will become more vulnerable.
Fasdal believes that other bond classes like German 10 year bonds will benefit should the geopolitical situation deteriorate. He advises that equity long investors who are nervous about the situation should consider reducing exposure over the summer. They can do so, he says, by buying good options in the equity market or by shortening CFD index trackers. But investors should also consider moving from equities into higher rated bonds and those with longer maturities.