Key takeaways from our Frontier sovereign client meetings: Zambia & Ethiopia
Last week, we held a series of client meetings in London, our first since Covid began eighteen months ago, meeting with a mix of fixed income and equity investors in EM and Frontiers, Africa specialists, and special situations and distress funds. For some of the investors we met, it was their first meeting since the pandemic began too. We summarise some of the key discussion points here.
The two countries that came up the most, in pretty much every meeting, were Zambia and Ethiopia. The biggest pushback was with our recommendation on Zambian eurobonds, with some investors expressing optimism that Hichilema would treat bondholders favourably and that copper prices would support Zambia’s BOP and reform efforts.
There was also some optimism over where Zambia would trade post-restructuring. Views on Ethiopia were conversely mostly agnostic, with few clients expressing a strong opinion on how Ethiopia’s restructuring would play out and whether private creditors would be asked to participate given lingering ambiguities on the Common Framework.
Besides those distressed cases, there was great interest in the “quasi-distressed” cases of Tunisia and Sri Lanka, and to a lesser extent El Salvador. In general, clients were slightly less pessimistic than we are on Tunisia’s prospects, but few seemed to hold strong convictions at this stage. Sri Lanka was discussed less than expected, given the volume of questions we typically get on the country, and here too the consensus view was one of resigned pessimism. It was generally perceived that these two countries, aside from Ethiopia, are the most likely to default over the next 12 months.
On El Salvador, among the small number of investors that were following it here, opinion was also negative. The consensus view was that the IMF programme is dead, and the government had little time (ahead of the maturing 23s) to devise a credible path out of the crisis. Some investors saw prices as expensive, even after the recent sell-off, with potential for even lower recovery values.
To read our full meeting notes – complete with recommendations - go here: https://tellimer.com/article/key-takeaways-from-our-london-client-meetings
Join us at our Panel session: The Post-pandemic risks & opportunities for long term EM investors Day 1 | 15.05 BST Featuring Tellimer’s Stuart Culverhouse and 7-Chord CEO Kristina Fan
If you'd like to arrange a call with Stuart to discuss Frontier-EM Sovereign Bond themes, contact us today at sales@tellimer.com