Aberdeen's Tunisian Bargain Most Traders Want Nothing to Do With

  • Tunisia's 10-year bond yield climbs to the highest on record
  • Nation has 'capacity and willingness to pay' debt: Aberdeen

Investors unnerved by a string of deadly terrorist attacks in Tunisia have sent the nation’s debt tumbling to an all-time low. That hasn’t deterred Aberdeen Asset Management Plc from buying the bonds.

Aberdeen last bought Tunisian debt in the middle of the year and is seeking to go back for more on bets the attacks won’t hinder the nation’s ability to honor its liabilities. The yield on the nation’s 10-year dollar bonds jumped to a record high following a bus bombing that killed 12 people last month, about five months after a gunman murdered 38 tourists on the beach. At least 20 people died in March when militants stormed a museum in the capital.

Tunisia’s 10-year bond yield climbs to record after three major terrorist attacks this year

“The country’s capacity and willingness to pay is still there,” Patty Cao, a research analyst at Aberdeen, which manages about $500 billion, said by phone from London. "Despite the knee-jerk reaction, we feel comfortable with the underlying situation. Tunisia enjoys really good relations with the U.S. and the European Union." 

Tunisia will probably benefit from more military and financial aid from Western allies in its fight against terrorism, according to Aberdeen. The only country to keep a democratic transition on track since the Arab Spring is constructing a barrier along the Libyan border to seal off the flow of jihadists and black market trading. The International Monetary Fund is in discussions with Tunisia for further assistance after having loaned the nation about $1.7 billion over two years.

The government’s resolve to boost growth and tackle corruption bolstered the fund house’s view the country’s debt is oversold. The yield on Tunisia’s $1 billion bonds rose 33 basis points in December to 7.9 percent on Monday, headed for a fifth straight month of advances. The bond was little changed as of 1:08 p.m. in London.

‘Better Than Headlines’

The terrorist attacks this year have taken a toll on tourism, which accounts for about 7 percent of Tunisia’s economic output and employs 15 percent of the nation’s workforce, according to the IMF. 

"The problem for Tunisia is that security risk hits the backbone of its economy, the tourism sector and as you can see with Egypt’s case once you have severe security concerns, tourists will mostly prefer other destinations," Sergey Dergachev, who helps oversee $13 billion at Union Investment in Frankfurt, said by e-mail. Union Investment has no holdings in Tunisian debt and prefers Morocco’s more liquid bonds.

The central bank cut the benchmark interest rate in October for the first time in four years. Gross domestic product may slow to 0.5 percent this year before expanding 2.5 percent in 2016, the central bank said.

“The reality isn’t rosy but it’s better than the headlines,” Slim Feriani, chairman of Gulf Central Agency Asset Management Ltd., said by phone from London. “From the investor’s point of view, that’s a good thing and you can exploit this gap.”

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