Most Emerging-Market Currencies Fundamentally Undervalued - Pimco
July 18 2011 - 8:15AM
Dow Jones News
The majority of emerging-market currencies are fundamentally
undervalued from a long-run perspective, a portfolio manager at
Pacific Investment Management Co. said Monday in a note discussing
the investment firm's outlook.
Pimco portfolio manager Lupin Rahman pointed out that Asian
countries are generally moving to allow faster nominal appreciation
of their currencies as they face inflationary pressures. "We expect
this trend to continue and be facilitated by China's depegging from
the dollar," she said.
Bonds denominated in the local currencies of emerging-market
countries are especially attractive, Rahman said, while adding that
the dollar-denominated debt of emerging-market sovereigns and
corporates may also offer opportunities.
Pimco sees emerging markets outperforming advanced economies
over the next three to five years, with growth averaging 6% in the
developing world, compared with 2% for advanced economies.
In Latin America and emerging Asia, the firm forecasts growth in
the 6% to 7% range in that period, coupled with a soft landing in
China. Countries in emerging Europe are likely to experience a
period of modest growth in the 4% range, the firm forecasts.
-By Anjali Cordeiro; Dow Jones Newswires; 212-416-2200;
anjali.cordeiro@dowjones.com