AMLO’S Actions Erode Investors’ Confidence in Mexico

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After Mexico’s president-elect, López Obrador, announced that he plans to scrap the most important infrastructure project of the past two decades – the New Mexico City International Airport, the peso had one of its worst days since President Trump’s election and the stock market, which fell 4%, had its worst close in a decade.

According to JPMorgan Chase & Co which lowered its expectations for Mexico, the decision (which followed the mandate of the referendum held on the issue, with minimum participation -only 1,067,859 votes, or less than 1% of the Mexican population), “left investors worried about how he would manage the economy and increases the probability of the central bank raising interest rates.”

Morgan Stanley also reacted by changing its preference of exposure to that country from an overweight to an underweight position due to “the short-term asymmetric risks associated with the free trade agreement with the US and the airport situation.”

According to UBS the issue seems even riskier, since they warn that this dynamic could be used to carry out material changes in Mexico, such as invalidating “effective suffrage, not re-election” or even the central bank’s autonomy. “We see the potential for a public referendum to be approved as a constitutionally valid way of enforcing changes in the future, including possibly extending the six-year presidential mandate. The use of reserves at the central bank (Banxico) could also be subject to the people’s choice,” they point out in the attached report.

AMLO, who will not be sworn into office until December 1st, stated that after the public consultation, “our decision is to obey the referendum mandate, so two runways will be added to the military airport at Santa Lucia, the current Mexico City airport will be improved, and the Toluca airport will be upgraded, so that shortly we will have solved the saturation in Mexico City’s current airport.”  The politician also commented that, “in economic terms, with this decision the Federal Government is going to save, around 100 billion pesos.” Just with the change in capitalization value due to Monday’s fall, Mexican companies lost 17 billion dollars, or more than 341 billion pesos. This means that in just one day, they lost more than three times the savings promised by AMLO.

Meanwhile, President Enrique Peña Nieto informed that Grupo Aeroportuario de Ciudad de México, or GACM, the company in charge of the New International Airport of Mexico (NAIM) project, will continue working on the construction of the new terminal in Texcoco at least until his last day in office, November 30th. Whereas, Juan Pablo Castañón, President of the (CCE), or Business Coordinating Council, said that the consultation lacks legal fundamentals in order to be accepted and warned that if after December 1st the stance continues to be to halt the Project underway in Texcoco, stakeholders will undertake legal actions in defense of the Project, and “in favor of Mexico’s economic development.”

The President, Enrique Peña Nieto, also warned that if the airport is canceled, the next government will have to comply with all its contractual and financial obligations, which includes advancing airport bond payments. According to AMAFORE, Afores investments in the NAICM are assured: “Workers must be calm about their savings, since the instruments used by the Afores for this investment, Fibra-e and Bonds, are backed by the collection of the TUA (Airport Use Fee), that is, by the flow of passengers, so the investment of their savings has enough guarantees to recover the capital plus a yield higher than inflation,” the organism said in a statement.

Steve Drew (Janus Henderson Investors): “Argentina is Going to Be One of the Best Bond Markets in the Next Six Months”

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According to Steve Drew, Portfolio Manager and Head of Emerging Markets Fixed Income at Janus Henderson Investors, the Emerging Market Corporate bond is an asset class that has been often overlooked and misunderstood, but this trend is distinctly changing. With about 15 years of history, this asset class sometimes behaves as a teenager, reacting with tantrums every now and then. 

“This evolving asset class is growing rapidly and is now disrupting previous notions of how and where to earn income. With an investable universe of 2,149 billion of dollars, the JP Morgan CEMBI Broad Diversified Index is twice the size the of the JP Morgan EMBI Index, one of the most frequently used benchmarks for Emerging Market Sovereign bonds”, said Drew.  

Over the past 10 years, the Emerging Market Corporate asset class has also doubled the annual growth rate of Emerging Market Sovereign bonds, 18% vs 9%. It now comprises 52 countries, 12 sectors and 645 unique issuers, set against 149 issuers for the EM Sovereign debt.

In Emerging Markets, corporate bonds have higher credit quality than sovereign bonds, the average credit rating of the JP Morgan CEMBI is BBB- and 59% of its universe is investment grade, whereas the JP Morgan EMBI has an average rating of BB+ and only 51% of its bonds are investment grade.

“There is one big market that dominates the issuance of Emerging Market Corporate debt, and that is China, who happens to be an investment grade country, and therefore, lot of the companies that issue debt in China are investment grade”, explained Steve Drew.

There are also some other characteristics that make EM Corporate debt attractive. Duration, a matter that is in every fixed income investors mind now that the Federal Reserve is hiking interest rates every three months, is lower in the EM Corporate debt than in most of other credit asset classes. For example, their benchmark duration is only 4.52 years, whereas EM Sovereign bond’s benchmark has a duration of 6.66 years, the US Aggregate Bond index has a duration of 6,36 and the Global Aggregate Bond index has a duration of 7.16 years.     

Recently, emerging markets have grabbed the attention of news headlines, debt and currency crisis in Argentina and Turkey, elections in Mexico and Brazil or trade tensions in China have added uncertainty to the asset class. But, when volatility is translated across many issuers, there is less volatility in EM Corporate bonds than in EM Sovereign bonds. EM Corporate bonds have lower maximum drawdown and lower standard deviation than the EM Sovereign bonds, with -4,6% vs -6,6% (5 years trailing, as of 31 August 2018), and 4,2% vs 6,0% (3 years trailing, as of 31 August 2018), respectively.  

EM Corporate bonds also have lower leverage than developed markets, both in investment grade and high yield asset classes, and their forecasted default rates for 2018 are expected to be lower than those of US High yield. 

“Emerging Market Corporate bonds, as an asset class, has lower leverage, less or similar volatility, lower duration and is actually cheaper than other developed markets. So, what risks are the investors taking? They are taking the macro and geopolitical risks, and sometimes foreign exchange risks, even if the investors are buying a dollar denominated bond”, explained Drew.

“Lately, Emerging Markets have suffered a sell-off, but they had a fantastic performance in 2016 and 2017. In the last 16 years, the total return of JP Morgan CEMBI Broad Diversified, annualized, has been a 7%, only 90 basis points below US High Yield (measured by BofA Merrill Lynch U.S. High Yield Master), but being an investment grade asset class, having better credit quality, lower leverage and duration”, he added.  

Where are EM Corporates headed?

Argentina, Turkey, Indonesia, South Africa, Brazil and Mexico have recently created some noise, but this noise is not necessarily related with the fundamentals of those countries, part of the uproar is strongly related to the Fed’s normalization of their monetary policy.

“In Emerging Markets, is very important to quantify how the macro, the geopolitical and foreign exchange risks are going to affect the country you are investing in. You should only invest when you get a green light in both the fundamentals and the macro. Back in 2014, US imposed new sanctions on Russia, a country that represents about 5% of the JP Morgan CEMBI Broad Diversified Index. Spreads widened 700 hundred points, but it was not a credit fundamental story, it was a macro story. So, we bought bonds issued by Gazprom, a company that has more cash than debt in its balance sheet and we knew it was a good investment. In 2015, all sectors in Brazil were trailing, whether it was a paper company, a petrochemical company or a protein producer, all companies traded at discount, without considering whether they were a good company or not, due to markets exposure to Lava Jato corruption case. For five months we were not invested in Brazil, the catalyst to go back and invest in the country was when we saw that Dilma Rousseff’s was going to be impeached, breaking the negative cycle.

In 2016, during US general election campaign, Trump threatened to build a wall on Mexico’s border and said that Mexicans would pay for it. If the US were to finally build that wall, the one company that would benefit from the construction would be CEMEX, which bonds were punished by the markets, trading at a discount of 10% to 20% for four weeks. When we saw the Mexican peso trading at 21 pesos against the dollar, we bought some more Mexican corporate debt, to see if we could take some foreign exchange translation risk”, said Drew. 

Since the beginning of this year, US foreign policy has created some distortion in Emerging Markets, but fundamentals are still good. From a valuation perspective, countries like Argentina, are now looking attractive. “Argentina is going to be one of the best bond markets in the next six months. Some of the quality companies that we have invested in Argentina are trading at 15% to 16% discount, if they were in any other country or in any other jurisdiction in the world, they would be trading at half that spread. Some of the Argentinian companies that we have invested in are one to two time leveraged, and they are strategically important within their country, but they are cheap because their macro circumstances. Turkey, on the other hand, has 105 billion dollars in its banking system to roll over in the next six months. Erdogan has already said no to an IMF bailout package, making more complicated for bond holders to recover their investments. Some of the banks’ Tier 2 capital debt is already trading at 70 to 80 cents of a dollar, but we think some of this debt is already worth 0. That is why I think Turkey is to avoid”, concluded Drew.

Important Information

US Offshore

This document is intended solely for the use of professionals, defined as Eligible Counterparties or Professional Clients, and US Advisors to Non-US Investors and is not for general public distribution.  We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes. 
Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757) and Henderson Equity Partners Limited (reg. no.2606646) (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE), are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Henderson Secretarial Services Limited (incorporated and registered in England and Wales, registered no. 1471624, registered office 201 Bishopsgate, London EC2M 3AE) is the name under which company secretarial services are provided. All these companies are wholly owned subsidiaries of Janus Henderson Group plc (incorporated and registered in Jersey, registered no. 101484, registered office 47 Esplanade, St Helier, Jersey JE1 0BD).

We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

© 2018, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC.

 

Morgan Stanley Advisor Joins Bolton’s New York City Office

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Morgan Stanley Advisor Joins Bolton’s New York City Office
Foto: ahundt. Bolton ficha en Nueva York a Nicolas Schreiber

Nicolas Schreiber has joined Bolton Global Capital‘s New York City office. Schreiber, formerly with Morgan Stanley, manages $180 million in client assets. His international clientele includes high net worth individuals and institutions based in the US, Europe and Latin America.

Schreiber began his career as a financial advisor with HSBC Private Bank in 2001 in Manhattan. Two years later, he moved to UBS International where he worked for 5 years until joining Smith Barney in 2008. Smith Barney was acquired by Morgan Stanley in 2009 where Schreiber has worked for the last 9 years before joining Bolton in October 2018. Custody of his client accounts will be through BNY Mellon Pershing.

Bolton recently opened an office on 5th Avenue in New York City to recruit Manhattan based advisors who wish to convert their practices to the independent business model. Since the financial crisis of 2008, several hundred teams have migrated their client accounts from the major banks and wirehouses to independent broker dealers and registered investment advisors like Bolton. Over this period, Bolton has recruited financial advisors with more than $5 billion in client assets from the major banks and wirehouses.

Bolton provides compliance, back office, and brand development support as well as the wealth management and trading technologies for its independent financial advisors. Under Bolton’s independent business model, advisors retain a much higher percentage of their fees and commissions and yet have access to all of the wealth management and trading capabilities offered by the largest firms.

Schreiber hold a bachelors degree in economics as well a CPA designation from the Catholic University in Argentina. He lives in Williamsburg in Brooklyn NY with his wife Florentine and two children Philippe and Melody.

“We are proud to have such a well respected professional affiliate with our company and look forward to supporting the continued growth of his wealth management business. Mr. Schreiber will operate under the trade name Nomad Advisors.” Said Bolton in a statement.

New Legislation in the State of Florida for Foreign Trust Companies

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Florida pone en marcha una nueva legislación para compañías de Trust internacionales
CC-BY-SA-2.0, FlickrPhoto: Neil Williamson. New Legislation in the State of Florida for Foreign Trust Companies

Various international independent trust companies with presence in the State of Florida gathered in 2013 to create Florida International Administrators Association (FIAA), with the common goal to support the enactment of modern legislation for foreign trust companies, throughout their affiliates, that engage in marketing activities in Florida. FIAA’s primary goal has been to obtain an approved new section in the Florida Statutes that defines and regulates a Qualified Limited Service Affiliate (QLSA).

FIAA’s founding members Citco Corporate Services Inc, CISA LatAm LLC, JTC Miami Corporation, Amicorp Services Ltd, Corpag Services USA Inc and Integritas Inc, have registered to become a QLSA and all have been granted such qualification by the Florida Office of Financial Regulation (FOFR). This qualification, which is imperative by law and provides adequate supervision, has been a fundamental step in the consolidation of the international fiduciary industry in Florida.

FIAA’s  President Ernesto Mairhofer, Secretary Myriam Bril and the rest of the Directors, Emilio Miguel, Tony Valdes, Anthony Perea and Ewout Langemeijer, will carry out a series of events in the financial market of Miami with the objective of publicizing the new regulatory framework and ensuring that the trust services offered by international Trust companies are only through companies registered and approved by the FOFR, in order to preserve the good reputation of this sector and helping to maintain relations with the leaders of this industry.

Afores will Have to Wait in Order to Invest in International Mutual Funds

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Las afores tendrán que esperar para invertir en fondos mutuos internacionales
Pixabay CC0 Public DomainPhoto: AMAFORE. Afores will Have to Wait in Order to Invest in International Mutual Funds

It had seemed that the beginning of 2018 would mark a big milestone in the way the Mexican Pension Plans, or Afores, invest. At the end of 2017, the ‘Comisión Nacional del Sistema de Ahorro para el Retiro’ (CONSAR), or National Commission for the Retirement Savings System decided, among other things, such as making CERPI more flexible or including SPACs, to include Mutual Funds with active strategies as an additional investment vehicle. This decision was published in the official bulletin in January 2018.

As Carlos Ramírez, President of the CONSAR, commented, “When looking to invest with an international asset manager, we look for better yields and this is what we have seen with the mandates that have paid a good return… Mutual funds are a reflection of the mandates and what we are really doing is opening another option for investing abroad, especially with the small and medium Afores in mind.”

However, in a recent interview with Funds Society, which will be available in the printed magazine this October, Ramírez commented that, unfortunately, this resolution has as yet not been implemented waiting for its authorization in a pending CAR, or Risk Committee meeting, “which would formally give life to mutual funds, and which to date was unable to be held for various reasons. I hope it can be achieved before the end of the administration so that we can see closure on an issue that we have been working on for a long time, which is a very deep analysis of the benefits of Afores being able to invest in mutual funds, and which we hope to be able to complete before this administration ends. It‘s practically ready, all that’s missing is that CAR meeting.”

Meanwhile, Carlos Noriega Curtis, President of AMAFORE, told us prior to the Third Afores Convention that this meeting will most likely not go ahead until the next administration is in power: “If during the transition stage, within the next two months, there is communication between the incoming and outgoing governments, the CAR will meet, if not, it will meet as soon as it is able to do so following the transition.” The executive added that they are watching very closely how the situation develops. “All the information has been prepared. We, as an association, have been supporting the importance, the necessity, and the convenience of being able to invest in mutual funds… we are convinced of this, and we are doing everything possible to achieve it,” concluded Noriega.
 

Dan Siluk (Janus Henderson Investors): “We Will Probably Look Back to US Treasuries when the Fed Announces They Have Reached their Neutral point”

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Borrowing Donald Trump’s electoral campaign slogan, Dan Siluk, co-manager of the Absolute Return Income strategy at Janus Henderson, explained at the Madrid Knowledge Exchange 2018  event that markets are at the beginning of a new cycle of quantitative tightening that will “make rates great again”.

In the past decade, the intervention of the three main central banks were able to save the global economy from the financial crisis, but at the same time there were some intended and unintended consequences. The balance sheets of the Federal Reserve, the European Central Bank and the Bank of Japan rose exponentially, substantially dampening the volatility in the markets. 

The VIX index, who typically settled in the 20 – 30 points range over decades, in the last ten years traded in a very tight range, between 10 and 15 points. Any time there was a bout in volatility, the presidents of the central banks always came back to give an answer that reassured the markets. That’s what happened during the Greece and the Eurozone crisis in 2011-2012, when Mario Draghi pronounced his “Whatever it takes” speech, or in the “taper tantrum” episode, in the summer of 2013, when Ben Bernanke’ FOMC statement was interpreted by bond investors as a sell signal. 

With a clear correlation between central banks’ balance sheet size and the value of global assets indices, there has been inflation in practically all the asset classes, something that has greatly favored passive investments, like ETFs and index funds.    

“In the past decade, investors could do pretty well by simply earning the beta of the market. They could obtain an attractive performance regardless whether they owned rates or credits, just because rates were driven lower, and credit spreads were driven tighter. Any bouts of volatility were short lived, because central bankers were coming to the rescue. So as long as investors could ride through those periods of volatility their fixed income portfolios tended to do pretty well”, said Siluk. 

However, consumer price inflation has barely appeared. Except for United States and United Kingdom, were inflation expectations are lower in the near future, is expected that there will be a real inflation growth in the rest of developed economies, that would be the case of the Eurozone and Japan. In the latter country, after decades of low growth, consumption and growth in wages is returning. While in the Eurozone, unemployment levels are declining in many of the member states. Also, the Asian region excluding Japan is contributing significantly to global inflation. The emerging consumer is one of the fastest growing segments of the global economy and lately is leading inflation.

According to Janus Henderson Investors’ portfolio manager, we are facing the beginning of a new cycle, in which the Federal Reserve is reducing its balance, the European Central Bank has reduced the volume of monthly of its program purchases, aiming to finalize it at the end of year. And, even the Bank of Japan, in the last two years has slowed its program of quantitative easing, sporadically decreasing its balance.

Upside risks to rates

In the US, the necessity of financing a swelling deficit has significantly increased the supply in Treasuries. This increase together with a decrease in foreign investors demand on Treasuries, mainly due to the higher cost of hedging the exposure to US dollars, has partially diminished the total demand for Treasuries.

“Fiscal expansions tend to generate high levels of inflation. Even when there is a strong dollar due to the diversion in monetary policies among developed economies. Trump’s administration has certainly a bias towards a weaker dollar, which is inflationary. All these factors support our vision that rates are going to climb, and curves are going to steepen, that does not necessarily mean that we are going to wake up one morning and see rates 25 or 50 basic points higher. Typically, what happens is that they try to trade in a range and when they break that range, the highest point of the range becomes the new support level. For quite few months of this year, we have seen these 2,70% -3,0% yield range in the US Treasury 10-year bond. We just broke the 3,0%, and at some point, this 3% becomes now the point that backs up a resistance level”, he said. 

All these factors are pointing out that you need to be very nimble in fixed income management, specially in terms of asset allocation. Therefore, in this strategy, they favor a benchmark agnostic strategy.

“Benchmark indices normally have certain limitations. We need to be active and flexible, to invest anywhere around the globe. For example, today, rather than bear interest risk in US, which is rising rates, we are looking at commodity-producing countries, like Australia and New Zealand. Because China is slowing down, these economies have very high household debt to income ratios. Their banking costs are increasing. Local banks are rising mortgage rates, whereas central banks are on hold. So, the domestic banks are partially doing the job of the central banks, who are maintaining a dovish position. We rather have interest rate risk in countries that are dovish or on hold monetary policy”, he explained.      

“We will probably look back to US Treasuries when the Fed announces they have reached their neutral point.  The US is today the highest yield across the developed world. It is also a very steep curve in the front part of the curve. The 10-year Treasury bond yields are offering a spread of 20 basis points over the 2-year notes, so investors are not actually getting paid for the additional interest rate risk or duration risk. On the other hand, the front-end of the curve will be an even more attractive investment once the Fed will finish their hiking cycle”, he concluded.

Important Information:

US Offshore:

This document is intended solely for the use of professionals, defined as Eligible Counterparties or Professional Clients, and US Advisors to Non-US Investors and is not for general public distribution.  We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Janus Capital Management LLC actúa en calidad de asesor de inversiones. Janus, INTECH y Perkins son marcas registradas de Janus International Holding LLC. © 2018, Janus Henderson Investors. La denominación “Janus Henderson Investors” incluye a HGI Group Limited, Henderson Global Investors (Brand Management) Sarl y Janus International Holding LLC. Para obtener más información o localizar la información de contacto del representante de Janus Henderson Investors en su país, visite​ ​​www.janushenderson.com​​​.

Janus Henderson Investors is the name under which Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), and Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office 201 at Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services.

© 2018, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC

Abanca to Open an Office in Miami Before the end of 2018

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Abanca abrirá una oficina en Miami antes de que finalice 2018
Pixabay CC0 Public DomainPhoto: Abanca. Abanca to Open an Office in Miami Before the end of 2018

Abanca has obtained the license from the Federal Reserve of the United States (Fed) to open an office in Miami and operate in the United States.

The license that comes into the project after a year of work enables the Spanish bank to develop total activity with companies and non-residents and, in certain circumstances, to develop activities with residents of average and high incomes. Miami is a city with a large presence of Latin American, Spanish and Portuguese non-residents, groups that will focus on Abanca’s growth strategy.

With this new opening, the firm’s objective is to continue to grow in markets with high potential and, as in the case of Portugal, in the company segment and medium and high income.

The Miami office, located in the Brickell financial zone, will open before the end of 2018 and will have 12 employees, four Spanish and the rest of the United States.

Abanca is present through representations in Brazil, Mexico, Panama, Venezuela, France, Germany and the United Kingdom. In addition, the entity has centers in Portugal, with its own bank card and Switzerland, where we have offices with both modalities.

Tim Stevenson, To Retire From Janus Henderson

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Tim Stevenson, gestor del Janus Henderson Horizon Pan European Equity Fund, se retira
Pixabay CC0 Public DomainPhoto: James Ross (right) Tim Stevenson (left) . Tim Stevenson, To Retire From Janus Henderson

After 32 years with Janus Henderson Investors, Tim Stevenson, Director of Pan European Equities, has decided to retire from the industry. According to the company, Tim will remain with the team on a transitional basis through the first quarter of 2019.

James Ross, his co-manager on the Janus Henderson Horizon Pan European Equity Fund will continue to manage the fund. “The fund will follow the proven strategy that has delivered success over the long term by investing in high quality European companies. The investment process and objective will not change.”

James has worked directly with Tim co-managing Pan European Equity portfolios since August 2016 and has worked alongside him as a member of the European Equity Team for many more years in an earlier role as a UK equity fund manager. James Ross has 11 years of financial industry experience and holds the Chartered Financial Analyst designation.

Stevenson says: “James has impressive enthusiasm for, and knowledge of, the companies and the opportunities that exist from investing in Europe. The job of the European fund manager requires energy, brains, determination and skill. James has all of these and I am so pleased that he is taking on the full responsibility of looking after clients’ money in the complex but exciting area of Europe. I want to take this opportunity to wish him the very best of luck, and to thank clients for their support and patience over so many years. Finally, I would like to also thank all the great colleagues with whom I have worked in my career at Janus Henderson.”

Ross says: “I have thoroughly enjoyed working alongside Tim for the last few years; I am excited at the prospect of taking over sole responsibility for our mandates after his retirement. Tim will leave behind a legacy of consistent value-creation for clients; a record that I will seek to emulate.”

“We wish Tim well with his retirement and look to James and the wider European equity team to help build on his long-term success. If you have any questions about this announcement or any other investment-related queries please speak to your usual Janus Henderson representative.” The company concluded

 

Is the Market Satisfied with Bolsonaro’s Victory in the First Round?

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¿Está el mercado satisfecho con la victoria de Bolsonaro en la primera vuelta de las elecciones presidenciales de Brasil?
Pixabay CC0 Public DomainNunu_Lopes. Is the Market Satisfied with Bolsonaro's Victory in the First Round?

Despite the possible risks and populisms, the market’s hopes and expectations were fulfilled and Jair Bolsonaro (PSL) moves to the second round of the presidential elections in Brazil; where he will be tested in both support and popularity against Fernando Haddad, the Worker’s party (PT) candidate. The result, while reassuring for the market, does not dispel all risks.

Although final election results will not be revealed until next October 28th, this is a clear indication of in which direction the political winds are blowing in Brazil.

“Losing the presidency is really in Bolsonaro’s hands. Today there will be a strong rebound of Brazilian assets, as financial markets assume that Bolsonaro will become the next President of Brazil in the second round of elections later this month. More than anything, it’s a sigh of relief for the market that leftist candidate Haddad, whose policies would not have helped Brazil out of its current economic hole, will almost certainly not become President,” says Edwin Gutierrez, Head of Emerging Markets Sovereign Debt at Aberdeen Standard Investments.

The reason is simple: much of Bolsonaro’s appeal is the fact that he is not part of the political establishment, which has completely lost its credibility in recent years. “He also has a credible plan of how to deal with two of Brazil’s most pressing economic problems: the cost of its pension system and its debt stock. Addressing these issues has probably become more difficult as a result of these elections. His party has won a larger bloc in Congress than what it had previously and the unfortunate results of other parties could lead to some defections, which should help him,” adds Gutierrez.

This result has allowed Brazilian markets to continue with their recent rally, as they were worried that the Workers’ Party could return to occupy the presidency. However, Paul Greer, Portfolio Manager at Fidelity International, observed that Brazil has challenges that go beyond achieving a new government.
In his opinion, if Bolsonaro wins in the second round, the post-electoral euphoria would soon disappear. “Bolsonaro’s controversial far-right opinions will make it difficult for his administration to approve legislative measures given the limited presence of his party, the PSL, in the Senate (5% of seats) and in the lower house (10%).”

According to the analysis carried out by the Fidelity International portfolio manager, elections aside, “we believe that Brazil’s fiscal balances will continue to deteriorate and that the sovereign rating will continue its decline towards a B rating over the next 12 to 18 months. The country’s growth is still below its potential level and we expect it to continue at that slow pace in the near future.”

The main concern for Renta 4 Banco is that, regardless of the final result on October 28th, no party has a clearly reformist plan. It would be necessary to control public accounts and reform social security and pensions. “Even so, and as we have seen in Mexico, where the new government seems to be orthodox in its economic decisions, we do not rule out that something similar happens in Brazil, which in turn could translate into a recovery of the Brazilian Real and be positive for securities with high interests in the area,” the financial institution points out in its latest report.

 

BlackRock Opens New Miami Office Consolidating its Presence in the US Offshore and LatAm Markets

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BlackRock abre nueva oficina en Miami y consolida su presencia en los mercados de US Offshore y Latinoamérica
CC-BY-SA-2.0, FlickrEduardo Mora, Armando Senra y Jordie Olivella. BlackRock Opens New Miami Office Consolidating its Presence in the US Offshore and LatAm Markets

Up to 40 industry professionals gathered at the end of August to celebrate the opening of BlackRock’s office in Miami, which is located at 701 Brickell Avenue and which will bring together the firm’s entire workforce within the same workspace.

“For me, this is a testament of our commitment to Miami, and to Latin America, and we will conclude the year with a team of 300 people dedicated to the LatAm and Iberian regions, and the greatest part of our growth has come from the Americas, which is the region with the fastest growth of our entire company,” Armando Senra, Managing Director and Head of Latin America & Iberia for BlackRock pointed out. Based in New York, he wanted to be present at the opening of this new office.

The new office addresses the need to better serve investors in the Miami area. It has state-of-the-art technology and will welcome all employees of the firm, including the offshore sales team, the official institutions’ group, and the Separately Managed Accounts product team.

“I believe that with this office we are solidifying our presence in this market. For us, Miami goes far beyond the local market, we believe that it is a point from which we can affect BlackRock’s influence, not only in the US Offshore market, but also in the rest of Latin America, it’s a very special moment for us, “explained Eduardo Mora, Co-Head of BlackRock’s Offshore business, with a special focus on Home Office and Key Accounts, during the typical inaugural ribbon-cutting ceremony.

Miami Presence

BlackRock already had a broad presence in Miami since 2013, the year in which it started with a staff of 5 people and which now totals 12 industry professionals. During these 5 years, the international asset management company has seen its assets under management grow at an average annual rate of 17%.

This is your home and I would like to welcome you,” said Jordie Olivella, Co-Head of BlackRock’s Offshore business with a special focus on US Offshore Field Sales, addressing the cocktail audience. “We are committed to the market, to the city, and to our clients and their success. That is our focus every day and the spirit of BlackRock. “