Emerging Market Currency Turmoil Curbing Structured Note Sales

Sales of structured notes denominated in developing-nation currencies plummeted this year as investors sidestepped emerging markets amid turmoil from Ukraine to Argentina.

Issuance in currencies from the Turkish lira to the Nigerian naira fell to $202.3 million, or 2 percent of global sales, compared with $932.4 million in the same period of 2013, according to data compiled by Bloomberg.

Political unrest in Ukraine and Thailand along with fears of economic instability in China, Argentina and Turkey as the Federal Reserve withdraws stimulus measures has roiled markets. A Bloomberg index tracking 20 emerging market exchange rates has fallen 2 percent this year, building upon the 7 percent decline in 2013.

International funds are retreating “because the turmoil, started in Argentina, caused a general decline across emerging markets,” said Pawan Gupta, managing director and head of emerging market structuring for the EMEA region at ING Groep NV (INGA) in London.

The appeal to international investors of structured notes in Brazilian real and Russian ruble has declined after the lifting of restrictions and taxes on direct investments in the sovereign debt of the two countries. Sales in the currencies dropped to $28 million, compared with $303 million in the same period of 2013.

Editors: Michael Shanahan, Tom Freke

To contact Bloomberg News staff for this story: Luca Casiraghi in London at lcasiraghi@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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