Key is identifying corporate beneficiaries of the current economic and political backdrop
We recently spent several days traveling through Mexico City and Monterrey meeting with corporate bond issuers across a wide swath of sectors. While the overall message was mixed, the meetings support our constructive view of Mexican corporate credit. The current economic backdrop of solid US growth, a weak Mexican peso and low energy prices — coupled with progress among Mexican corporates toward meeting developed market standards of corporate governance and operations — provides a positive fundamental backdrop over the longer term, in our view.
That’s not to say that the Mexican corporate credit story, especially in the intermediate term, fits neatly into a simple, positive narrative. The country is facing some headwinds, and there are winners and losers. In our view, understanding the current economic and political dynamic is critical to a successful investment strategy in the Mexican corporate space. Below we elaborate on the impact of several issues confronting Mexico.Read More
Opportunities can be found, but the outlook is negative overall
As my Invesco Fixed Income colleague Sean Newman outlined in his blog, Brazil: Macro Headwinds are Strengthening, the country is suffering from economic, fiscal and monetary risks. The increasingly negative macro backdrop — as well as an ongoing scandal involving the country’s largest company, Petrobras —has weighed heavily on Brazilian corporate credit.
Year-to-date, Brazil is the worst-performing Latin American country within the JP Morgan Corporate Emerging Market Bond Index (CEMBI) with a total return of -1.35%.1 It was the third worst globally behind only the Ukraine and Nigeria. This performance stands in stark contrast to that of the CEMBI overall, which has returned 1.9% year-to-date.Read More