The last week which saw USÂ market weakness also has seen a rush into emerging market bond funds. This has made most of the yield funds sector less appealing than before. We like these funds at normal double digit discounts, rather than at single-digit discounts, which may be a sign of a bubble.
The same does not hold for individual bonds we own. They are euroland plays and have been nipped a bit by the EM enthusiasm. As monster bond funds shift gears they sell Euro, US$, and UK bonds to buy emerging market ones.
Aberdeen Asia Pacific Income Fund is a special case. My enthusiasm for Oz currency and yields is why I have been banging the drum for FAX since I started GI. Now that the market is catching up with me, FAX has ceased to be a strong buy. It will become one again when the short attention span of Wall Street shifts elsewhere.
The Prime Minister of Korea has just resigned over the ferry disaster, which may not have much impact on the stock exchange there tomorrow. Falling on your sword is a Confucian tradition. I cannot believe the recently named Seoul PM had much to do with the sloppy safety rules which were tolerated for decades.
Korea is less significant to our portfolio than the continued uncertainty over Ukraine but if there is a real drop in the market, I will buy.
Over Ukraine, my secret theory is that Putin will make trouble galore but is not going to let his troops invade eastern Ukraine to take on a basket-case economy where Russia has weaker claims than over Crimea. To play my hunch, average down in Yandex. I will try to get more YNDX shares at under $24 tomorrow.
I am less sure about the appeal of Raven Rus, RUS:GB, dependent on leasing warehouse and logistic facilities to mostly Western corporations. Both Britain and Russia have reason to interfere with this business. Â
There are some technical changes I wanted to signal to you. Banco Santander has been moved back into the yield portfolio. The main reason is that SAN ADR owners have been given the option of taking their dividends in cash, mainly because of SEC rules. So the yields are liquid.
