BlackRock overweight local currency EM debt, sees buffer in spreads

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LONDON (Reuters) – BlackRock is overweight local currency emerging market debt, seeing a potential for positive returns and a buffer in spreads as U.S. interest rates rise, Sergio Trigo Paz, the firm’s head of emerging market fixed income said on Wednesday.

“There are not that many opportunities where you get a positive total return and emerging markets give you that,” Trigo Paz told a media briefing in London, adding that synchronized growth was creating a virtuous cycle for emerging markets. “And as rates go higher we still have some spreads buffer.”

He added that Russia, South Africa and Turkey were all attractive to some degree, thanks to growth, some stability in the policy-making and the potential to cut rates.

Although Turkey has come under selling pressure this week on worries about the economy and geopolitical tensions, Trigo Paz said that with a 12.5 percent carry, investors were getting paid to take on the risk.

“(It) makes Turkey attractive from a relative value perspective,” he said.

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