Emerging market veteran Paul DeNoon has upped exposure to Indonesia as he believes the Southeast Asian country can deliver strongly on reform promises.
DeNoon has 31-years investment experience and is one of four managers on the $949 million AllianceBernstein Emerging Markets Debt Portfolio fund.
The Citywire + rated said he upped exposure by a percentage point in the fund over the last quarter, making it 10.35% of the fund and the second biggest allocation after Mexico.
‘We like the new story in Indonesia. The new government is lowering energy subsidies and investing more in infrastructure. They’re trying to adapt to a period of lower commodity prices,’ he said.
DeNoon said the new President Jokowi is also improving the country’s fiscal policy to free up resources which will be dedicated to direct investments.
‘Our outlook for Indonesia changed from stable to improving. We think that some credible monetary policies will be crucial for the country,’ he added.
Elsewhere in the fund, the manager favours Mexico for similar reasons. ‘They’re opening up their energy sector and significantly improving their fiscal policies.’
‘On a spread basis, Mexico is not as attractive as Indonesia, but we like the country for its fundamentals,’ he added.
In the frontier market space, DeNoon is overweight the Dominican Republic, as he thinks the country is strongly adjusting following a difficult period.
DeNoon is significantly underweight Russia and Ukraine as he thinks the political turmoil, along with the oil price fall, has drastically worsened the situation in the area.
‘De facto, there’s a war going on in Eastern Ukraine. The turmoil has not been resolved and there’s uncertainty around Western sanctions,’ he said.
In regards to Venezuela, another risky country from a debt perspective, the manager has a neutral position as he believes bad news have been already priced-in.
‘We maintain a position there based on valuations. We also think Venezuela will run into payments’ pressure in the near future,’ he said.
A possible relief to the country might be brought by China, according to him. ‘China could help them during this oil crisis, but it’s not clear in which form it could happen.’
Selective on EM corporates
On the credit side, DeNoon is overweight EM corporate bonds, with specific bets in Brazil, Indonesia and Mexico. ‘We went into this space to replace the yield we used to get from Russia. We have a strongly diversified exposure, with small allocation in each security,’ he said.
Over the past three years, the Emerging Markets Debt Portfolio fund returned 14.32%. This is while the JPM EMBI Global index rose 16.85%.