<a href=www.novinite.com>The Bulgarian News.com For the record: 16 June 2003, Monday. Yahoo News

Emerging-market bonds have performed very well this year, buoyed by unprecedented cash inflows as increasing numbers of investors have found this high-yielding asset class a relative haven from the volatile equity markets of the developed countries.

Indeed, according to the Financial Research Corp., emerging-market debt funds received $712.2 million in new money through the end of April, after having taken in $534.9 million in all of calendar year 2002. [By comparison, the sector suffered an outflow of $553.1 million the prior calendar year.] But in spite of the renewed investor interest, emerging-market bond funds remain overlooked and small -- the entire category comprises only about $5.475 billion in assets.

Still, if the funds continue to perform anything like Kristin Ceva's $95.3 million Payden Emerging Markets Bond Fund, they may pop up on more investors' radar screens. Ceva, who has managed the fund since its inception in December, 1998, emphasizes regional diversification in her portfolio and typically stays away from distressed-credit countries. For the three-year period ended Apr. 30, the fund gained 13.4% [on an annualized basis], vs. an 8.8% rise by the average global bond fund.

And while the fund's performance has outstripped that of its peers, its expenses haven't. Though the fund's annual expense ratio was increased from 0.80% to 0.90%, it remains below the peer group's average of 1.38%. Palash Ghosh of S&P's Fund Advisor recently spoke with Ceva about the fund's strategy. Edited excerpts from their conversation follow:

Q: What has driven this recent inflow of new cash into emerging-market bonds? A: At both the retail and institutional levels, investors are reducing their equity holdings and increasing their exposure to fixed-income securities. Moreover, with this low interest rate environment, high-yield bonds and emerging-market debt instruments have become more attractive. As the equity markets in the developed countries remain quite volatile, an increasing number of investors are uncomfortable with stocks and seeking safe havens.

Q: What kind of bonds do you look for? A: We invest in both sovereign and corporate bonds of emerging-market countries that are exhibiting improving macroeconomic and political trends. We like to emphasize geographic diversification across Latin America, Eastern Europe, and Asia.

Q: What are some of the fund's other significant data? A: Its average duration is about 6.2 years, and the average maturity is 13 years. However, we can invest without regard to duration or maturity. Q: What about credit quality? A: The fund's average credit quality is BB+. One cannot think of emerging-markets debt as being below-investment-grade anymore. That's a thing of the past. A number of emerging-market nations [including Malaysia, Mexico, South Korea, Chile, South Africa, and Poland] have had their sovereign debt upgraded in recent years to investment-grade status. For example, Mexico, which is the largest country [by allocation] in virtually all emerging-market bond indices, has a relatively high rating of BBB.

Our fund's average credit quality is typically higher than that of most emerging-market indexes because we seek to avoid distressed-credit or nonrated countries like Nigeria and the Ivory Coast.

Q: What are the fund's top country allocations? A: As of Mar. 31: Russia, 19%; Mexico, 17%; Malaysia, 8%; Peru, 7%; Brazil, 7%; Bulgaria, 6%; Colombia, 6%; Philippines, 5%; Panama, 5%; Romania, 5%; Ukraine, 4%; and South Africa, 4%.

As a risk-control measure, we typically will not permit any one country to account for more than 20% of the fund's assets.

Q: What is the fund's sector breakdown? A: As of Mar. 31: corporate was 10%, and sovereign, 87%. We limit our exposure to corporate debt in the emerging markets to about 15% because the corporates in these countries often lack liquidity.

We purchase corporate debt in countries where we have confidence in their sovereign risk. Our corporates tend to reside in upper-tier, well-managed companies like Televisa in Mexico.

Q: What benchmark do you use? A: While most emerging-market bond funds use the J.P. Morgan EMBI Plus Index, we feel that index is too heavily concentrated in just three countries: Mexico, Brazil, and Russia [which together represent 65% of the index].

Our portfolio is closer in structure to the JP Morgan EMBI Global Diversified Index, which reflects our focus on regional diversification. As of Apr. 30, this index had 46.5% allocated in Latin America [including 12.3% in Mexico and 9.2% in Brazil], 23.4% in Europe, and 20.4% in Asia. Q: How have you performed against that index? A: Year-to-date through Apr. 30, the fund has gained 9.9% [gross of fees] while the index rose 10.3%. In calendar 2002, the fund jumped 10.6% [gross of fees], while the index went up 13.7%.

For the three years ended Apr. 30, the fund gained 14.3% [on an annualized basis, gross of fees], while the index rose 14.5%.

Q: Why have you been underperforming that index recently? A: Primarily because certain defaulted or CCC-rated countries like Argentina and Ecuador have delivered significant outperformance -- and we're not focused on such markets. In fact, Ecuador's debt markets have rocketed 54.69% this year, while Argentina gained 23.72%. Our focus on higher credit quality precludes investing in such risky countries.

Q: What's the premise for investing in Russia, which is currently your largest allocation? A: From a macroeconomic perspective, if you're a bond investor, you're looking at a country's ability to pay back its debt. Russia has done an excellent job in reducing its debt-to-GDP ratio to less than 40% [in fact, it has a better debt-to-GDP level than such European nations as Poland or Hungary].

There are no concerns about default risks for the foreseeable future, and Russia has current-account and fiscal surpluses. Moreover, it offers political stability, pretty good economic growth [partially supported by high oil prices], and progress on structural and economic reforms. We're comfortable with the overall economic and political fundamentals in Russia.

However, on a microeconomic level, there are some concerns about corporate governance. Russia has represented an overweight position in the fund as long as I have worked on it. The country has been the top-performing emerging market over that period.

Q: What about Mexico? A: We continue to have a favorable view of Mexico's debt markets -- it's considered a "safe haven" in Latin America. Because Mexico appears in the Lehman Aggregate Index, it attracts many "crossover" high investment-grade investors. As such, Mexico has a very broad base of investors.

Q: There appears to be some optimism about Brazil's economy now after years of turmoil. A: We currently have a neutral weighting in Brazil, reflecting our cautiously optimistic stance on the country. Brazil's newly elected President, Luis Inacio Lula da Silva, apparently seems committed to reforms in social security, tax, and pension. He's saying all the right things, but we are awaiting implementation of his stated programs.

Brazilian politics are extremely fractious. Some members of Lula's own party who oppose his reforms.

Q: You mentioned you have no exposure in Argentina, but aren't things improving there, given that the Argentine peso recently reached a 12-month high, and the Central Bank has intervened to stabilize the currency and is seeking to resolve the country's defaulted debt? A: Argentina is certainly on our radar screen, but they still have to go through a lot of restructuring of their defaulted debt. We don't have a good enough idea of how the new President-elect Nestor Kirchner will treat this process. There are simply too many variables and political risks in Argentina now.

Q: What other emerging markets are you strictly avoiding now? A: Turkey and Venezuela are very high-risk markets now. The situation in Venezuela could be particularly explosive, given the social tensions, high unemployment, oil strikes, and turmoil surrounding President Hugo Chavez. Turkey has very difficult debt dynamics -- eventually the money received from the IMF and the U.S. will run out.

Q: In Europe you have positions in Romania and Bulgaria but not in the more prominent countries like Poland, Hungary, or the Czech Republic, which are joining the European Union. A: We see more value in the long-term convergence stories of Romania and Bulgaria -- these nations are likely to join the EU by 2007. The spread valuations in Poland, Hungary, and the Czech Republic are extremely tight -- we just don't see much value nor upside in these countries.

Q: Which emerging markets have you been moving out of recently, and where have you been adding? A: In the fourth quarter of 2002, we began shifting out of Eastern Europe [as they had enjoyed a nice run-up], and we moved into Latin America, particularly Colombia, Peru, and Brazil, where security prices had gotten quite cheap.

Q: Isn't Colombia a high-risk area politically? A: President Alvaro Uribe of Colombia is vastly different from Chavez of Venezuela. Uribe's government is highly respected and seems committed to enacting fiscal and structural reforms to improve the country's debt-to-GDP ratio. They also seem genuinely committed to fighting the nation's guerrilla presence. Moreover, Colombia is the third-largest recipient of aid from the U.S., so they have a lot of financial help.

Times OnlineJune 14, 2003

MY FAITH in a few rare shares as a means to increase capital over the long term remains undiminished, which is why I have not previously recommended bonds, whether gilts or corporate debt. But the collapse of prices in shares of even the best companies in the past three years has brutally demonstrated the need for diversification in any investment portfolio.

Hence the case for owning shares in the Ashmore SICAV Emerging Markets Debt Fund. The fund’s managers aim to provide long-term capital growth through investment in emerging market bonds, debt securities and other investments (primarily those issued or guaranteed by the governments of the countries concerned, and also those issued by public sector and private sector companies).

The investments within the fund are denominated in US dollars, euros, Swiss francs and other major currencies; and, to a lesser extent, the currencies of emerging market countries themselves.

Ashmore, which runs $3 billion (£1.82 billion) in its various funds, is well regarded by institutional investors as a specialist in the debt securities of emerging economies, which may or may not be below “investment grade”.

Russia, for example, with $70 billion in reserves and oil riches, is now perceived as nearly investment grade. Mexico has reached investment grade, while Brazil, Venezuela, Nigeria and Equador remain high risk.

We already have exposure to emerging economies via shares in such multinational companies as HSBC, AIG, Shell, ENI and L’Oréal. But those are only side bets that the underlying businesses will capitalise on future reforms and growing prosperity in various developing countries.

Ashmore is a direct bet on that progress in emerging countries. Its biggest bets are currently concentrated on Mexico, Brazil and Russia, where it has allocated 15 per cent, 18 per cent and 19 per cent respectively of its fund. This concentration is unusual and reflects current opportunities. Ashmore normally has 3 per cent to 5 per cent spread over each of 20 different countries at any given time.

After three years of “submerging” valuations in shares in developed markets, sophisticated investors are not so wary of emerging markets. The smart money is betting on sovereign debt, which, being more difficult to analyse than corporate risks, trades at lower (more attractive) prices.

So investment in emerging market debt within a blue chip share portfolio can increase returns while the economies of the US, UK, Europe and Japan remain anaemic.

Buying shares in Ashmore is a little more complicated than investing directly in specific company shares. But a good stockbroker, private bank or independent financial adviser can open the door. Given that Ashmore’s flagship fund has produced a net annual return of

19 per cent over the past ten years, I reckon it is worth the effort.

Minimum investment is $5,000 or ?5,000, and it cannot be bought in sterling. But, hey, this is a good time to cash in on the lower dollar with sterling still relatively strong.

An initial sales charge of up to 5 per cent may be added, although this is reduced or waived for big-hitters. There is no charge when you sell. The annual management charge is 1.5 per cent and if the shares grow at more than a “hurdle rate” of 10 per cent in net asset value per annum, the investment manager takes a further 20 per cent above the hurdle.

But if Ashmore’s investment managers jump that high, who am I to begrudge them their share of the spoils. For general inquiries and a prospectus, e-mail ashmail@ashmoregroup.com. I am buying Ashmore SICAV at $115.89.

• Since starting Share of the Month in April 1998, I have recommended 66 different companies, albeit concentrated within a handful of sectors: oils, pharmaceuticals, financials, speciality retailers and brands and technology, media and telecoms.

I have sold 27, but as my remit is to propose a different prospect each month, the number of shares still held in the portfolio is too great. Ideally, a growth portfolio should embrace between 12 and

15 shares, spread over four to five different sectors.

Therefore, I am pruning the portfolio of defensive shares, which I believe could underperform the rest as stock markets recover. Accordingly, I am selling Tesco, Walgreen’s, Weight Watchers and Exxon Mobil. This is purely a lightening up exercise and does not reflect deteriorating fundamentals in any of those excellent businesses.

By Adam Geller The Associated Press

NEW YORK — Investors set aside disappointing employment data and lackluster retail-sales reports yesterday, limiting their profit taking in a market that eked out incremental gains and kept stocks at their highest levels in months.

The gains, albeit small, sustained a rally that drove the Dow Jones industrial average Wednesday to its first close above 9,000 in more than nine months. The Dow finished virtually even yesterday, but the number of advancing issues significantly outnumbered decliners.

The Dow closed up 2.32 points, essentially unchanged, at 9,041.30. That followed a rise of more than 100 points on Wednesday, when it closed above 9,000 for the first time since Aug. 22, 2002.

Microsoft, one of the 30 Dow stocks, slid 78 cents to $24.09 per share following news of Microsoft Chief Executive Steve Ballmer's e-mail to employees outlining the dangers of dissatisfied customers and free software such as Linux.

Boeing, also a Dow stock, added 13 cents to $33.68.

The broader market also finished higher.

The Nasdaq composite gained 11.36 to 1,646.01. The Nasdaq is trading at levels not seen in 13 months.

The Standard & Poor's 500 index was up 3.90 to 990.14. The S&P is at levels not seen since last July.

At the end of trading yesterday, the Dow had risen 20.2 percent, the Nasdaq had gained 29.5 percent and the S&P had climbed 23.1 percent since March 11.

Analysts said that despite the limited nature of yesterday's gains, the fact that there was not a broader sell-off indicates a growing sentiment by investors that the market is rebounding.

"We've been in a long and deep bear market and investors feel like the worst is over, and what appeals to them more than anything is some of the stocks that have gotten hit the worst," said Richard Cripps, chief market strategist for Legg Mason of Baltimore.

Investors have been encouraged by better-than-expected first-quarter earnings, signs of economic improvements and upbeat assessments of the economy by Federal Reserve Chairman Alan Greenspan.

"People are anticipating that the economy is going to continue to grow — slowly, but nonetheless we are coming up from a very depressed level," said Richard Dickson, senior market strategist at Lowry's Research Reports in Palm Beach, Fla.

Even so, investors remain cautious ahead of the government's release today of May jobless figures.

"You have to see strong numbers for us to be convinced that the economy is in a true comeback and not just going up on air," said Stephen Carl, head of equity trading at The Williams Capital Group.

Gold/oil

In U.S. trading, gold soared $5.90 to $369.50 per ounce after the European Central Bank slashed interest rates and the euro rebounded in a rally that made dollar-priced bullion cheaper to European investors.

Oil surpassed $30 per barrel yesterday as OPEC producers Saudi Arabia and Venezuela prepared to seek assurances from nonmember Mexico that it would follow the cartel in any move to tighten supply. The three will meet today. In U.S. trading, oil gained 61 cents to $30.34 per barrel.

Business Week

How long can it last? That's the question investors are asking as they watch the torrent of portfolio money rushing into Latin America this year -- a surge on a scale not seen since early 1998, before the Russian currency crisis pulled the plug on emerging markets. Top of the heap are countries that just a few months ago were dismissed as lost causes: Argentina, reeling from the shock waves of a debt default and devaluation, and Brazil, where the prospect of a left-wing victory in last October's presidential elections had Wall Street in a panic. Many analysts were telling their clients to get out while they could.

Now it seems investors can't get back into Latin America quickly enough. Inflows into emerging-market bond funds, where Latin America commands at least a 50% weighting on average, reached $1.95 billion in the year to May 21, according to EmergingPortfolio.com, a Boston fund-research company. That's more than three times the $648 million they attracted in all of 2002. "A lot of people have made a lot of money" by betting on Latin America, says EmergingPortfolio's managing director, Brad Durham. "And they believe there is a lot more to make." Right now the region certainly offers some of the planet's juiciest returns. Brazilian bonds have surged nearly 42% in the year to May 27, as measured by J.P. Morgan Chase & Co.'s emerging markets bond index. By comparison, the U.S. high-yield debt market has returned 15%. With deflation looming in Japan, Germany, and now the U.S., institutional investors are hunting for yield. Latin America has become one of their favorite stalking grounds. While 10-year U.S. Treasury bills carry yields of 3.3%, Brazil's government paper offers more than 11% and Venezuela's 14%. The region is also benefiting from improving fundamentals. Brazil, the highflier of recent months, has come back from the brink of debt default and produced a run of record monthly budget surpluses, reassuring investors its economy is back on track. The economies of Peru, Colombia, and Chile are also growing faster than those of the developed world, while Argentina's has staged a remarkable recovery. While Latin bonds have led the way up, equities are going along for the ride. The Merval, the index of the Buenos Aires stock exchange, has climbed 48% in dollar terms since the start of the year, making it the top-performing stock market worldwide. Brazil's Bovespa is not far behind, up 37%. Even some of the region's smaller bolsas are showing gains: The Lima Stock Exchange is up 30%. Like bonds, the region's bourses are bouncing back from some deep lows last year. The surge has been led by local investors. International flows are still negative for the year, says EmergingPortfolio, a sign that many are still leery of putting their money in Latin companies, which often show little regard for the rights of minority shareholders. Indeed, the recent rally is hardly a sign that Latin America is safe for investors. "When a big tide comes in, it takes all boats up with it," says Mohamed El-Erian, who oversees $11 billion in emerging market bond funds at PIMCO, the Newport Beach (Calif.) investment company. "Then you notice that some have holes in them." El-Erian is bullish on Brazil, where the new administration is pushing reforms of the pension and tax systems that would put public finances on a firmer footing and boost efficiency across the economy. But he's staying clear of countries such as Argentina and Venezuela, where the direction of economic policy is uncertain. One worrying sign is that foreign direct investment by multinationals into Latin America has not kept pace with the rush of portfolio capital. No matter how big the tide, it has to ebb. "Emerging markets move in five-year cycles, while in the U.S. it's 10 years," notes emerging-markets veteran Mark Mobius, who as managing director of Templeton Asset Management Ltd. oversees some $7 billion in assets. A rate increase in the U.S. would probably trigger a rush back to the comparable safety of U.S. Treasuries, says EmergingPortfolio's Durham. Further deterioration in the global economic environment could also trigger investment outflows, given Latin America's heavy dependence on commodity exports. In short, investors better keep their life jackets handy.

By Jonathan Wheatley in São Paulo

06/02/2003 - Source: <a href=www.latintrade.com>LatinTrade - BNamericas Spanish financial group SCH (NYSE: STD) is likely to launch a new technological center in Mexico next year to expand the success of Altec, its Chile-based regional tech center, Altec CEO Patricio Melo told BNamericas. SCH launched Altec in 2001 and today the firm serves eight of its Latin American subsidiaries (Argentina, Brazil, Colombia, Venezuela, Chile, Mexico, Puerto Rico and Uruguay) with technological services from Santiago, Melo said. Altec's client list includes SCH's largest Brazilian bank Banespa, which was not initially planned, he said, adding that Banespa and the banking subsidiaries in Chile and Puerto Rico are the SCH units currently demanding most services from Altec. SCH chose to locate Altec in Santiago because of the city's comparative advantages in terms of telecoms and human resources, among other factors. The Spanish group has earmarked US$15mn investments in the first two years of operations, and expects annual cost savings of US$300mn-400mn when it is fully up and running. The great success of Altec in the region has prompted SCH to begin closing down a Madrid-based tech center that was serving Latin America, Melo said. The Mexico center is being created due to Altec's cost saving ability for the group in the region, and the large presence of SCH in the Mexican market, he said, adding the country has a great pool of talent in terms of human resources, which is expensive to transfer to Chile. Some 25% of Altec's 460 professionals have been brought in from SCH subsidiaries outside of Chile. SCH is yet to decide if the Mexican tech center will operate as an Altec competitor or subsidiary, Melo said, adding the latter is more likely. The Chilean center plans to hire another 30 professionals in the near future due to great demand from SCH subsidiaries for Altec's services, Melo said. In Chile, SCH controls the country's largest bank Santander Santiago (NYSE: SAN), which has some 28% of the local loan market. SCH is Latin America's largest financial group with 23 million clients and assets exceeded US$115bn. SCH also runs the largest banking franchise in Spain.