Market Vectors high-yield debt portfolio manager Fran Rodilosso, today commented on defaults among emerging markets corporate bond issuers.
“Although, in my opinion, we may be closer to the top of the credit cycle than the bottom”
“While defaults among corporate emerging market bond issuers ticked up in the first quarter of 2012, many of them, particularly in Asia, were anticipated,” said Rodilosso. “All in all, we see credit metrics across sectors and regions remaining relatively stable.”
Rodilosso pointed out that of this year’s defaults occurring in emerging markets regions, few resulted from tightening credit conditions overall. He pointed to the example of Centrais Eletricas do Para (Celpa) in Brazil, where Brazilian banks did pull their credit lines but for reasons specific to Celpa’s situation, not for larger reasons emblematic of problems with the system in Brazil itself.
“Although, in my opinion, we may be closer to the top of the credit cycle than the bottom,” continued Rodilosso, “balance sheets for issuers in emerging markets are still relatively healthy and liquidity is still readily available. Of course, some companies are to be avoided due to balance sheet and management issues, but we see no indication that systemic issues caused rising default rates.”
Mr. Rodilosso joined the Market Vectors team earlier this year bringing with him more than 20 years senior-level experience in emerging market, high yield debt research and portfolio management.
Mr. Rodilosso currently manages two Market Vectors high yield-corporate bond ETFs, Fallen Angel High Yield Bond ETF (NYSEARCA:ANGL) and International High Yield Bond ETF (NYSEARCA:IHY).
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $25.1 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of March 31, 2012.
Market Vectors ETFs are distributed by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $34.8 billion in investor assets as of March 31, 2012.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer’s financial health. The Funds’ underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds’ income.
The Funds, as they invest in high yield securities, may also be subject to a greater risk of loss of income and principal than higher rated securities. The prices of high yield securities are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities. The secondary market for high yield securities may be less liquid than the market for higher quality securities and, as such, may have an adverse effect of market prices of certain securities. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
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