News Overview

EM Corporate Bond Newsletter

June 2025

Monthly report of the fund management

"Courage is at the beginning of action, luck at the end (Democritus)". In line with this saying, many investors bet on a continued recovery of the markets and were rewarded. 

Emerging market corporate bonds achieved a slightly positive absolute performance in May. Risk premiums closed around 30 basis points tighter, supported by the postponement of tariffs. US yields rose by around 30 basis points along the yield curve. The long end (20–30-year government bonds) remained somewhat more volatile, also influenced by the outright panic in Japanese long-dated bonds. This segment of the market remains quite volatile in view of the growing global government debt, and trading is sometimes erratic as anchor investors such as insurance companies are finding it increasingly difficult to cope with the upward pressure on yields. 

 

Macro Overview

Commodity prices remained well supported and rose again in May. Even the oil price held up well, despite the increase in production to 411,000 barrels of oil equivalent by the members of OPEC+. Saudi Arabia was not prepared to put pressure on the market to discipline countries such as Kazakhstan or to prevent Guyana or Argentina from expanding their production capacities. Last week, Israel's attack on targets in Iran caused a sharp rise in crude oil prices, bringing them back above 70 US dollars per barrel.

The US labour market remains stable, but fewer and fewer new jobs are being created. This could change and surprise the market, as many companies will soon have to fill jobs due to the US migration policy. The purchasing managers' indices, even in the service sector, were lower than in April - companies, on the other hand, reported higher selling prices for their goods and services. Inflation remains at a high level. 

Emerging Markets Overview

China lowered its key interest rates again and offered support for the property sector in the form of cheaper loans from a special sovereign wealth fund. The economy remains fragile, as the increase in exports, supported by customs-related pull-forward effects, is expected to slow down in the foreseeable future. According to industry analyses large industrial companies are now only paying their invoices after an average of 80 days - a payment delay that is longer than in Covid times. It is well known that large companies such as BYD are exerting pressure on suppliers to issue invoices later....

In Brazil, President Lula continues to loosen the budget with more support for housing construction. The Brazilian real reacted negatively, which is seen as a clear signal from the market that this budget loosening would not be appreciated. News of corruption cases in the administration also caused his approval rating among the population to fall once again.

The Mexican central bank reduced the key interest rate by 50 basis points in response to a strengthening peso and a weakening economy. Crime remains high, and a politician was recently shot dead in Mexico City. Unilever and Walmart have nevertheless announced high levels of investment in Mexico, as the country remains an attractive location for large companies. 

In Turkey, President Erdogan wants to revive the guarantee program for SMEs and is also working on a new constitution. There are rumors that Finance Minister Simsek will soon "have to go". These are all circumstances that make the market  less attractive and so we reduced our weightings to a slight underweight in the fund as a first step. 

S&P raised Guatemala's rating to BB+, based on good macro indicators such as debt and growth. We have long favoured the country's government bonds as a selective off-benchmark addition and are positioned accordingly, as we are with those of the Ivory Coast. 

The situation in Colombia is less favourable. The IMF suspended Colombia's flexible credit line because the government did not take any measures to control the budget deficit, probably also because new elections are due as early as 2026. Here, too, an opposition politician was fatally injured at the beginning of June. However, there were good opportunities at the corporate level and so we subscribed to issues from Sura Asset Management (financials) and Grupo Nutresa (food). Nutresa is owned by the Colombian banker and billionaire Jaime Gilinski Bacal and "debuted" on the issue market. We subscribed to the 5-year bond here, which has already shown a nice price increase.  

Overview of EM Companies

Aeromex reported weaker figures, the tariff war is depressing demand. 

Buenaventura from Peru benefited from higher sales prices and increased production of silver, gold and copper over the course of the year. We are on alert over higher productions costs and will look at the next quarter's figures. 

Fitch confirmed Minsur's rating (our long-term overweight) at BBB-, which was underpinned by higher selling prices for tin and copper. 

Embraer continues to perform very robustly - new orders, solid balance sheet, hardly affected by tariffs so far and if it is, then in a positive way - should orders for Boing be cancelled (see cancellation by China). All this underpins our overweight in the fund. 

Klabin (Brazil) reported slightly weaker sales and lower debt. 

Celara (Celulosa Arauco, Chile) reported weaker figures, higher investments and a decline in sales and profits. We take a negative view of the development but remain invested for the time being for tactical reasons - we had subscribed to an issue here in April.  

Falabella (Chile) once again presented good figures, and the company should soon return to investment grade status. We are slightly positive, although a lot is already priced into the bonds. 

Bimbo Bakeries (Mexico) reported stable figures for Mexico and Latin America, while those for North America weakened - we have a neutral weighting here.

Our call with Alpek (Mexico) went well - the company is focussing on cutting costs to compensate for the unprecedentedly weak industrial momentum, as excessive Chinese production capacities are putting pressure on steel prices.  

We also remain overweight in Helios Tower and IHS (both mobile phone operators) from Africa. Helios reported good figures and conditions are improving for IHS, which is mainly active in Nigeria, as the country received a rating upgrade to B3 from Moody's in May. 

Suzano (Brazil) reported slightly weaker figures, but the announced Kimberly-Clark joint venture should be viewed positively. S&P agrees and has improved its outlook to positive. We remain overweight.

Raizen (Brazil) reported weak figures. The weak markets for ethanol and sugar are a burden. Debt increased significantly (from approx. 1.3 to 3.2 times EBITDA in one year) - we remain underweight despite the news of planned asset sales, which had a positive impact on the company's bonds in the short term.    

Braskem came under pressure from PP (polypropylene) producers from China and the US, as the company is currently not reaching 70% of its local production capacity in Brazil. The bonds were the big losers in the Latin American market and were downgraded twice (by Fitch & S&P). We had already been underweighted before, so the sell-off in bonds was significantly cushioned. 

Arcos Dorados (McDonald's franchise in Latin America) surprised with weaker figures; too much competition put pressure on the margin in Brazil. We are not invested here. 

Votorantim Cimentos (Brazil) reported slightly weaker figures, but we like the company's disciplined financial management and remain overweight.

Samarco (Brazil) presented good figures. Here we have built up an overweight in so-called PIK bonds ("a payment-in-kind = pays interest in additional bonds") in our funds & mandates, where this is in line with the guidelines. The idea was that the company would soon be able to issue "regular" but cheaper bonds due to its improved fundamentals, and these bonds would be tendered.

Marfrig (Brazil) took over Brasilfood, which had a positive impact on bonds - we are maintaining our slight overweight. 

The air traffic figures for Latam Airlines (Chile) continued to be positive in April, and we remain overweight here too.

The MLP Group, the logistics company from Poland, presented strong figures and its debt fell. We remained overweight but took some profits following the strong performance of the bonds. 

Note: The companies listed here have been selected as examples and do not constitute investment recommendations.

Outlook & Performance

The market remains technically strong. For some bond segments in Asia, risk premiums are even below those of their US counterparts, although a recent survey by JPMorgan showed that most investors consider a fair price above the US market to be more appropriate. 

Despite prudent weighting, we were able to slightly outperform the market at fund and mandate level. The focus on our top picks and the selective and tactical addition of EM government bonds had an effect. 

Note: Please note that investing in securities involves risks as well as opportunities.

Performance opportunities for the funds:

  • Still historically high absolute yields

  • The postponement of tariffs offers calmer waters for earning carry over the summer months  

Performance risks for the funds:

  • US policy remains unpredictable and capricious

  • Market may be too pessimistic about the US labour market; better figures could push up yields at the short end

Overview Performance

ERSTE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1W4B7 = Distributing share (A)
AT0000A1W4C5 = Accumulating share (VT)

Retail share classes

AT0000A05HQ5 = Distributing share (A)
AT0000A05HS1 = Accumulating share (VT)

ERSTE BOND EM CORPORATE IG

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1Y9D0 = Distributing share (A)
AT0000A1Y9H1 = Accumulating share (VT)

Retail share classes

AT0000A0WJX7= Distributing share (A)
AT0000A0WJZ2 = Accumulating share (VT)

ERSTE RESPONSIBLE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1PY56 = Distributing share (A)
AT0000A2MKX2 = Accumulating share (VT)

Retail share classes

AT0000A13EF9 = Distributing share (A)
AT0000A13EH5 = Accumulating share (VT)

Overview performance contribution in %

Performance contribution at country level

(relative to the benchmark)

Performance contribution at share level

(relative to the benchmark)

Source: Erste AM; Calculation period May 2025; Contribution to gross excess returns in %, Fund: ERSTE BOND EM CORPORATE, Benchmark: J.P.Morgan CEMBI Broad Diversified Composite Index hedged in EUR; Gross performance data (without deduction of management fee); The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the above portfolio positionings may change at any time. 

Fund management

Lead-Manager Péter Varga

...has been a member of the Credits team at Erste Asset Management since 2005. As a Senior Professional Fund Manager, he is responsible for various emerging market corporate bond strategies in the team. He has more than 20 years of investment experience. Before joining the company, Péter Varga was responsible for convertible bond and corporate bond funds and the management of two total return funds at Union Investment (Frankfurt/M.).

Co-Manager Thomas Oposich

...is a senior fund manager in the fixed income division of Erste Asset Management. His current focus is on emerging market corporate bonds. Thomas Oposich has been with the company since 2005 and has many years of experience in bond management. During his career, he has been responsible for a broad range of bond funds consisting of US government, money market and corporate bonds, as well as mortgage-backed securities and euro government bonds.

Co-Manager Agne Loibl

...has been with Erste Asset Management since 2010. As a Senior Fund Manager in the Credits team, she is responsible for emerging market investment grade corporate bonds and the Asian markets. Agne Loibl has extensive experience in the area of credits. She started her career in research at ESMT Customized Solutions in Berlin and moved to Risk Management Securitisations at Erste Bank in 2007. 

Relevant new issues

Overview Erste AM EM corporate strategies

Source: Erste Asset Management; Data as of 30.4.2025

Ratings

For a further analysis, you can view our fund at:

Morning Star Rating:                4 Stars
Morning Star Sust. Globes:     3 Globes
Scope Rating:                           A – 69/100

Contact us

Personal contact with you is particularly important to us.
If you have any questions about our investment solutions, our team will be happy to help you.

E-Mail: institutional@erste-am.com

Risk notes for the mentioned funds

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to Art 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the  website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund. Please note that investments in securities entail risks in addition to the opportunities presented here. The value of shares and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your shares. Persons who are interested in purchasing shares in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to Art 21 AIFMG for restrictions on the sale of fund shares to American or Russian citizens. Misprints and errors excepted.

The public sale of shares in the specified fund in Germany was registered with the Federal Financial Supervisory Authority, Bonn, pursuant to the German Kapitalanlagegesetzbuch (KAGB). The issue and redemption of unit certificates and the execution of payments to unit holders has been transferred to the Fund's custodian bank/depositary, Erste Group Bank AG, Am Belvedere 1, 1100 Vienna, Austria. Redemption requests can be submitted by investors to their custodian bank, which will forward them to the Custodian Bank/Depositary of the Fund for execution via the usual banking channels. All payments to investors are also processed via the usual banking clearing channel with the investor's custodian bank.. In Germany, the issue and return prices of shares are published in electronic form on the website www.erste-am.com (and also at www.fundinfo.com). Any other information for Shareholders is published in the Bundesanzeiger, Cologne.

Presentations:

It is expressly noted that presentations shall not be construed as providing investment advice or investment recommendations; presentations simply represent the current market opinion. The presentations are not intended as sales instruments and shall therefore not be construed as an offer to buy or sell financial or investment instruments. The investor shall be solely responsible for any and all decisions that he makes on the basis of this presentation.