(Business Week) Dollar bonds of Latin American nations from Panama to Uruguay provided the best returns in emerging markets this year, a rally that may extend into 2012 as lower debt and higher foreign reserves limit the effects of the European debt crisis.
Panama’s notes advanced 16 percent this year with annual volatility of 4.5 through Dec. 27, giving them a risk-adjusted return of 3.5 percent, according to data compiled by Bloomberg and JPMorgan Chase & Co. Uruguay’s notes returned 20 percent with volatility of 6.3 for a 3.2 percent risk-adjusted return. Seven of the top 10 bond markets were in Latin America, while debt from Pakistan and Egypt fell the most, the data show.
Latin American nations won 12 credit-rating or outlook upgrades as Panama’s $13.5 billion infrastructure investment plan boosted growth, Colombia pledged to cut its budget gap in half and Uruguay boosted foreign reserves 27 percent in a year. Shrinking debt ratios and higher ratings make the region’s bonds less susceptible to a slowing global economy while Europe’s recession may keep Hungarian and Turkish bonds lagging behind, according to Aviva Investors and Aberdeen Asset Management Plc.
“Latin America, despite the global slowdown expectations next year, is an area of relative calm,” said Jeremy Brewin, who helps manage about $4 billion as head of emerging-market debt at Aviva in London. “It feels like a safe haven.”