BlackRock Tips Baddies of Past in Hunt for Emerging-Bond Returns

  • Money manager likes bonds of Russia, Indonesia, Colombia
  • Oil exporting countries have emerged stronger after rout

The world’s biggest money manager has a strategy to capture returns in emerging markets after the biggest debt rally in four years: Buy the bonds that suffered most in the oil rout.

BlackRock Inc.’s head of emerging-market debt is snapping up bonds from the commodity-exporting countries that were forced to overhaul fiscal policy in response to a slump in oil prices over the past years. Russian ruble bonds are among the money manager’s top picks and it also favors Indonesia, Brazil and Colombia.

“The bad guys of the last crisis are the good guys going forward,” Sergio Trigo Paz said at a media briefing in London. “Sometimes when you are hit by a crisis you need to address the problems of your revenues. This is where you come out much better because you did your homework.”

A rebound in the price of Brent crude above $50 a barrel has transformed the outlook for emerging-market commodity exporters eight months after the commodity dropped to a 12-year low. BlackRock is betting that the countries and companies that survived the oil selloff have emerged stronger than countries that haven’t been forced to cut spending.

Russia has reduced budget spending to stem shortfalls and is forecast to emerge from recessions next year, while Colombia and Indonesia have taken steps to overhaul tax policies to shore up public finances eroded by the oil crisis.

“The good poster guys from the last three years were a bit too good to be true and stopped doing homework some time ago,” Trigo Paz said. “Now people are in a way concerned that they bought something that eventually didn’t go as well as they expected.”

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