New Champions of Emerging Markets Warn Pain Is Just Beginning
New Champions of Emerging Markets Warn Pain Is Just Beginning
(Bloomberg) -- The turmoil across emerging-market assets is about to get even worse, according to the world’s biggest publicly listed hedge fund firm.
Guillermo Osses, a money manager at Man Group Plc, said developing nations are about to pay the price for their ballooning debt loads since the 2008 financial crisis. Many emerging markets now lack the fiscal space to stimulate their economies in the same way as their more industrialized counterparts, he wrote in a note.
Meantime, a surge in new Covid-19 cases from Brazil to Russia, India and South Africa could force lockdowns to stay in place longer than anticipated.
“We believe that in the coming months, these unsustainable debt-to-GDP ratios will worsen significantly as a consequence of the weakening economic activity,” said Osses, the head of emerging-market debt strategies.
The $1.5 billion Man GLG Global Emerging Markets Debt Total Return Fund, which Osses helps manage, has returned 9.8% this year, trouncing 99% of peers, according to data compiled by Bloomberg. It’s one of just a few portfolios dedicated to the developing world with more than $1 billion under management that hasn’t lost money in that span. Osses and his colleague Lisa Chua have been sounding the alarm on emerging-market risks for the past several years, taking a more defensive approach in their allocations.
In past crises, Beijing has offered support to developing nations, something that is unlikely to happen this time around as the world’s second-largest economy is also ailing. Chinese coal consumption, property sales and transport congestion are all down compared with last year.
“China is unlikely to come to the rescue,” Osses wrote.
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