A Small Corner of the Corporate Debt Market Withstood October’s Sell-Off

(Bloomberg) -- As risk aversion weighed on developing-nation bonds in October, one small corner of the market resisted: sub-investment-rated corporate debt in Africa.

Emerging-market corporate bonds lost an average 0.7 percent this month, according to Bloomberg Barclays indexes. But dollar-denominated securities of companies in Ghana, Democratic Republic of Congo and Nigeria eked out gains, thanks to the relative isolation of those markets and the general scarcity of corporate debt in Africa.

A Small Corner of the Corporate Debt Market Withstood October’s Sell-Off

African nations occupied four of the top five places in a ranking of returns from developing nations in October. Five-year dollar bonds sold by the Mauritius unit of Helios Towers Plc, a London-based telecommunications-equipment maker with operations in Ghana and three other African countries, returned 0.8 percent.

Debt from Nigeria, which has only four listed corporate bonds, returned 0.6 percent. The bonds are rated at least three levels below investment level by S&P Global Ratings.

“The African corporate space is generally attractive because there is limited supply,” said Anton Kerkenezov, a London-based money manager who helps oversee about $9 billion of emerging-market bonds at Aviva Investors. “In the current weak environment, large benchmark issuers are more likely to underperform the market. Single name issuers with specific stories that make them less correlated to current volatility could, however, have the capacity to outperform.”

©2018 Bloomberg L.P.