Wealth Manager - Essential news for investment professionals

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

First State EMD team exploits Venezuelan volatility

First State EMD team exploits Venezuelan volatility

First State Investments has made a short-term gain from a tactical bet on the Venezuelan market despite widespread volatility in the Latin American country.

In the latest update for emerging market debt team, First State said it had made further changes to its South American exposure.

This follows Citywire A-rated manager Helene Williamson, who is head of the EMD unit, buying back into Argentinian debt after selling out of all holdings at the start of the year.

With the country currently undergoing anti-government protests and tabling plans for a new FX system, Williamson’s team saw Venezuela as an attractive short term bet over the past month.

‘Despite news of violent anti-government protests throughout February, Venezuela (+8.29%) outperformed. Positive price action was driven by an announcement that the country would launch a new FX system, ‘Sicad II’,’ it said.

‘Sicad II is expected to allow individuals and companies to sell USD for more Venezuelan bolivars than the current regime will allow, effectively devaluing the local currency.’

First State said a devaluation provided some relief to the fiscal deficit but added to inflationary pressures for a country already battling annual inflation of over 50%.

While the long-term picture is not as attractive, First State saw an opportunity for some tactical trading. ‘We increased exposure to long-dated Venezuelan paper mid-month and took profits on this after the news of Sicad II drove a market rally.’

Elsewhere over the month, First State said it had increased duration in its emerging market debt funds but remained in a short duration position overall.

Recent additions included Brazilian state Minas Gerais and state-owned Chilean energy company, Empresa Nacional del Petroleo. First State said these represented examples of attractive quasi-sovereigns and corporates, which are the most compelling opportunities.

The First State Emerging Markets Bond I fund has fallen 1.6% over the year to the end of February 2014. This compares to a fall of 4.23% by its Citywire benchmark, the JP Morgan EMBI +, over the same period.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Play Tesco, Japan and the rise of the central banker

Tesco, Japan and the rise of the central banker

 Libby Ashby and leading wealth managers scrutinise the food retail sector, Japan’s consumption tax hike and political risk in the markets.

Your Business: Cover Star Club

Veteran banker boosts Sanlam’s stockbroking team

Veteran banker boosts Sanlam’s stockbroking team

A veteran private banker has been recruited by Sanlam Private Investments to strengthen its advisory stockbroking team.

Wealth Manager on Twitter