The Saudi Aramco IPO in 2018 is expected to increase non-resident capital inflows. Saudi Aramco via Reuters
The Saudi Aramco IPO in 2018 is expected to increase non-resident capital inflows. Saudi Aramco via Reuters

Emerging markets shine for fixed income



Investors seeking attractive fixed-income returns over the next five years should look beyond “safe” developed economy sovereign bonds that dominate portfolios and explore opportunities in the better-valued emerging market debt space.

Historically, adding emerging market bonds to traditional fixed-income portfolios increased returns without the cost of additional risk.

Bonds are expected to face a rough ride over the coming years. Very low starting yields and rising inflationary pressures will place a substantial drag on the developed world’s sovereign bonds. Inflation is picking up –notwithstanding that oil prices have peaked – as global growth becomes synchronised and trade picks up from its recent doldrums.

In the US, a tight labour market points to nascent wage pressures and further tightening of Federal Reserve policy. The euro zone finally seems to be shaking off the after-effects of the crisis that struck across its periphery in 2011. Japan is growing steadily. And some of the recently struggling emerging market economies have shown signs of stabilisation.

Over the longer term, price pressures will persist amid central banks’ willingness to tolerate higher inflation rates than they have done in the past, stronger wage growth underpinned by minimum wage legislation, and potential after-effects of years of effects of quantitative easing.

Bond markets have started to reflect this good economic news. Yields edged up from last summer’s lows, particularly in the wake of the US presidential election as people anticipated that Donald Trump’s policies would further spur growth. Even so, about a fifth of the JPM GBI index of leading government bonds, worth nearly US$10 trillion, still register negative yields. These very rich valuations suggest developed economy sovereign bonds will continue to struggle through the cyclical recovery.

Less frequented parts of the fixed income universe – such as emerging markets – offer investors attractive prospects, as they currently benefit from substantial spreads over developed market sovereigns. Local currency emerging market bonds currently yield 6.4 per cent while emerging market hard currency bonds offer 5.3 per cent versus 1.4 per cent for developed market bonds.

What’s more, economic fundamentals are a lot friendlier to emerging market bonds than they are to their developed counterparts.

Take inflation; over the coming five years, we expect consumer price inflation in developed economies to rise to 2.1 per cent from 0.7 per cent in 2016. By contrast, inflation is expected to moderate to 3.5 per cent in emerging economies from 3.7 per cent.

Emerging market economies are also likely to grow faster than their developed rivals. We forecast emerging market real GDP to expand by 4.5 per cent a year over the next five years against an annual growth rate of just 1.6 per cent for developed countries.

A number of emerging economies are also benefiting from domestic reforms, including a shift to market-orientated policies.

A good example is India, where the prime minister, Narendra Modi, is implementing anti-graft measures and tax simplification steps that might yet pave the way for the country to reach its ­potential.

In the Middle East, oil prices remain the most important economic driver. Their sharp fall in 2015 forced GCC countries to initiate fiscal reforms and economic diversification that should lead to economic prosperity in the region. In the meantime, fiscal consolidation along with gradual recovery in oil prices should improve their public finances. In particular, in Saudi Arabia, the Aramco IPO in 2018 is expected to increase non-resident capital inflows.

There are, of course, exceptions – Brazil, for example, is again being rocked by political corruption scandals; or Turkey, where a shift to autocratic rule might be supportive of the economy over the short term, but at a cost of long-term stability.

Overall, emerging market countries with improving fundamentals and those with more worrying prospects seem to be in balance. That’s reflected in a more mixed pace of economic reforms after a generally positive trend in recent years, according to the OECD. Yet even in light of this uncertainty, emerging market bonds offer investors an attractive risk premium.

The relatively stable economic outlook, subdued inflation and attractive starting yields are forecast to bring 8.1 per cent in annual returns for emerging market local debt and 3.3 per cent on emerging market hard currency bonds (in US dollar terms) over the next five years.

By contrast, we expect the total annual return on the JPM GBI index of developed government bonds to be about 1.7 per cent, also in dollars.

A model portfolio of 80 per cent developed world government bonds and 20 per cent equally split allocation to emerging market hard currency and local currency bonds (unhedged) will generate an annual return of 2.5 per cent over the next 5 years, which compares favourably with the 1.7 per cent expected return for developed bonds.

This is in line with past experience. During the 2003-2017 period, a similar portfolio would have outperformed developed world government bonds by 87 basis points per year while exhibiting the same level of risk.

And since the start of 2003, a combined 50 per cent emerging market hard currency and 50 per cent local currency bond portfolio would have generated an annualised return of 8.3 per cent, more than 4 percentage points in excess of the developed market index, albeit with substantially higher levels of risk.

In a nutshell, despite a difficult environment for bonds, investors can find attractive fixed income returns in the emerging market debt space.

Luca Paolini is the chief strategist at Pictet Asset Management

Roll of Honour, men’s domestic rugby season

West Asia Premiership
Champions: Dubai Tigers
Runners up: Bahrain

UAE Premiership
Champions: Jebel Ali Dragons
Runners up: Dubai Hurricanes

UAE Division 1
Champions: Dubai Sharks
Runners up: Abu Dhabi Harlequins II

UAE Division 2
Champions: Dubai Tigers III
Runners up: Dubai Sharks II

Dubai Sevens
Champions: Dubai Tigers
Runners up: Dubai Hurricanes

UAE athletes heading to Paris 2024

Equestrian

Abdullah Humaid Al Muhairi, Abdullah Al Marri, Omar Al Marzooqi, Salem Al Suwaidi, and Ali Al Karbi (four to be selected).

Judo
Men: Narmandakh Bayanmunkh (66kg), Nugzari Tatalashvili (81kg), Aram Grigorian (90kg), Dzhafar Kostoev (100kg), Magomedomar Magomedomarov (+100kg); women's Khorloodoi Bishrelt (52kg).

Cycling
Safia Al Sayegh (women's road race).

Swimming

Men: Yousef Rashid Al Matroushi (100m freestyle); women: Maha Abdullah Al Shehi (200m freestyle).

Athletics

Maryam Mohammed Al Farsi (women's 100 metres).

Ukraine

Capital: Kiev

Population: 44.13 million

Armed conflict in Donbass

Russia-backed fighters control territory

Sweet Tooth

Creator: Jim Mickle
Starring: Christian Convery, Nonso Anozie, Adeel Akhtar, Stefania LaVie Owen
Rating: 2.5/5

COMPANY PROFILE

Company name: Almouneer
Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
$3.6 million led by Global Ventures

'The worst thing you can eat'

Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.

Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines: 

Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.

Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.

Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.

Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.

Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.

Name: Brendalle Belaza

From: Crossing Rubber, Philippines

Arrived in the UAE: 2007

Favourite place in Abu Dhabi: NYUAD campus

Favourite photography style: Street photography

Favourite book: Harry Potter

Sarfira

Director: Sudha Kongara Prasad

Starring: Akshay Kumar, Radhika Madan, Paresh Rawal

Rating: 2/5

Kill

Director: Nikhil Nagesh Bhat

Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal

Rating: 4.5/5

How to help

Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200

Naga

Director: Meshal Al Jaser

Starring: Adwa Bader, Yazeed Almajyul, Khalid Bin Shaddad

Rating: 4/5

Company Profile

Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000

Bullet Train

Director: David Leitch
Stars: Brad Pitt, Aaron Taylor-Johnson, Brian Tyree Henry, Sandra Bullock
Rating: 3/5

The specs

Engine: three three 212.7kWh motors
Power: 1,000bhp
Torque: 15,600Nm
Range: 530km
Price: Dh500,000+ est
On sale: early 2023

Company Profile

Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government

57 Seconds

Director: Rusty Cundieff
Stars: Josh Hutcherson, Morgan Freeman, Greg Germann, Lovie Simone
Rating: 2/5

ANDROID VERSION NAMES, IN ORDER

Android Alpha

Android Beta

Android Cupcake

Android Donut

Android Eclair

Android Froyo

Android Gingerbread

Android Honeycomb

Android Ice Cream Sandwich

Android Jelly Bean

Android KitKat

Android Lollipop

Android Marshmallow

Android Nougat

Android Oreo

Android Pie

Android 10 (Quince Tart*)

Android 11 (Red Velvet Cake*)

Android 12 (Snow Cone*)

Android 13 (Tiramisu*)

Android 14 (Upside Down Cake*)

Android 15 (Vanilla Ice Cream*)

* internal codenames

ROUTE TO TITLE

Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2

The Specs

Engine: 1.6-litre 4-cylinder petrol
Power: 118hp
Torque: 149Nm
Transmission: Six-speed automatic
Price: From Dh61,500
On sale: Now

What is dialysis?

Dialysis is a way of cleaning your blood when your kidneys fail and can no longer do the job.

It gets rid of your body's wastes, extra salt and water, and helps to control your blood pressure. The main cause of kidney failure is diabetes and hypertension.

There are two kinds of dialysis — haemodialysis and peritoneal.

In haemodialysis, blood is pumped out of your body to an artificial kidney machine that filter your blood and returns it to your body by tubes.

In peritoneal dialysis, the inside lining of your own belly acts as a natural filter. Wastes are taken out by means of a cleansing fluid which is washed in and out of your belly in cycles.

It isn’t an option for everyone but if eligible, can be done at home by the patient or caregiver. This, as opposed to home haemodialysis, is covered by insurance in the UAE.

SERIE A FIXTURES

Saturday (All UAE kick-off times)

Cagliari v AC Milan (6pm)

Lazio v Napoli (9pm)

Inter Milan v Atalanta (11.45pm)

Sunday

Udinese v Sassuolo (3.30pm)

Sampdoria v Brescia (6pm)

Fiorentina v SPAL (6pm)

Torino v Bologna (6pm)

Verona v Genoa (9pm)

Roma V Juventus (11.45pm)

Parma v Lecce (11.45pm)

 

 

Sustainable Development Goals

1. End poverty in all its forms everywhere

2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture

3. Ensure healthy lives and promote well-being for all at all ages

4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

5. Achieve gender equality and empower all women and girls

6. Ensure availability and sustainable management of water and sanitation for all

7. Ensure access to affordable, reliable, sustainable and modern energy for all

8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation

10. Reduce inequality within and among countries

11. Make cities and human settlements inclusive, safe, resilient and sustainable

12. Ensure sustainable consumption and production patterns

13. Take urgent action to combat climate change and its effects

14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development

15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

17. Strengthen the means of implementation and revitalise the global partnership for sustainable development

Company profile

Company name: amana
Started: 2010
Founders: Karim Farra and Ziad Aboujeb
Based: UAE
Regulator: DFSA
Sector: Financial services
Current number of staff: 85
Investment stage: Self-funded


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