Emerging market currencies ‘not clean enough yet’, says First State

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Emerging market currencies will only become more attractive in less volatile markets, said Helene Williamson, head of emerging market debt at First State Investments.

‘I’m not sure enough that the technicals are clean enough that you would want to go in,’ said Williamson. ‘We still see more risk reward in dollar than in local currencies.’

Williamson, who headed for First State from F&C at the start of August this year, revealed that the dollar-denominated First State emerging market debt fund currently has around 1% invested in local currency.

‘We own very little emerging market currencies at the moment as we still see a flight to quality emerging over the next few months.’

‘We may launch a local currency fund,' said Williamson who said 'a different market environment' would need to emerge before this would occur.

Emerging market currencies lost value in the second half of this year as investors sought safer assets and commodity prices fell.

Faster de-leveraging by European banks, occasional contagion from the Euro-periphery crisis and lower commodity prices stand as risks to emerging market fixed income, said Williamson.

First State's Emerging Markets Bond fund managed by Williamson, was launched in October this year.