News Overview

EM Corporate Bond Newsletter

October 2025

Monthly report of the fund management

 

Emerging Markets Corporate Bonds again delivered a positive performance in September. The longer-dated US government bonds (> 7 years maturities) came to the rescue, where yields closed-up to 20 basis points lower. Spreads remained relatively stable and showed slight weakness towards the end of the month.

Note: Past performance is not a reliable indicator of future performance.

 

Macro Overview

Although the US dollar hardly moved against other major currencies, the precious metals were unstoppable. Silver managed a performance of over 17%, gold just under 12%, but copper and zinc also showed a very robust development with 5% and 3% respectively. The strong performance is very positive for mining companies in the emerging markets and for those countries that have these mineral resources. The price of oil weakened in September, losing just under 5%. Weaker economic data and OPEC+, which is literally on the "gas pedal" of production, are not a good combination.

Note: Please note that an investment in securities entails risks in addition to the opportunities.

As expected, the FED lowered key interest rates by 25 basis points. Aside from the weakness in the labor market (negative trend in job creation), Powell did not make a real case for this first cut. One reason for this weakness is that many companies are waiting to see to what extent they can integrate AI into their processes. In addition, US officials are also currently at home. More explosive than ever is the political tug-of-war between the two major parties and when an agreement can be expected. The big question is how the budget gap will be financed. 

Emerging Markets Overview

China's policy to reduce harsh local competition (e.g. closure of unprofitable capacities in the steel and chemical sectors, among others) seems to be bearing its first fruits. Deflation in producer prices is heading for an end, at least the latest data pointed in this direction. It would also be a breather for those regions and countries (see EU and import tariffs on steel) that have so far suffered from the dumping of Chinese goods.

Indonesia is turning further away from a democratic path. Rumors are circulating about new laws to limit the independence of the central bank. The military is also to take on new tasks in daily life. The government instructs to provide the economy with fresh loans through a created holding company Danantara, in which shares in companies and banks are bundled. The government is also planning a windfall to the population for the New Year's holidays to improve the bad mood in the country and to calm protests.

All these measures bring back memories of days long gone in Indonesia. The risk premiums for government bonds have not yet reacted and remain at around 70 basis points for a 10-year bond for the time being. However, the currency is one of the weakest in the emerging markets.  

Senegal is very likely to receive fresh money from the IMF. This allows the country to stabilize its financial situation after it became known that the debt was much larger than stated and stands at about 100% of GDP.

Colombia's President Petro is now "persona non grata" in the USA, his visa has been revoked. Official cooperation in the fight against drugs was also terminated. Here, too, the risk premiums of the bonds did not differ for the time being, as Colombia is currently benefiting from solid economic growth and from the hope of a regime change which could follow in the 2026 elections. 

According to polls, José Antonio Kast, the candidate who can be classified as "right-wing" in Chile in the political spectrum, will possibly be elected as the new president in the second round of voting on November 16.  The country is currently enjoying stable economic growth - the high copper price and falling inflation are helping. 

In Argentina, President Milei continues to fight to stabilize the currency until the elections on October 26. Around 200-300 million US dollars are sold every day, and local yields have risen to 100% (real yield is just under 60%). The USA and the IMF promised help and so a currency exchange of 20 billion US dollars was recently agreed. According to US Treasury Secretary Scott Besent, "Argentina is in an acute liquidity crisis", a so-called "currency board" is being discussed, i.e. the peso could be completely eliminated or pegged to the US dollar. 

Note: The companies mentioned in this article have been selected as examples and do not constitute investment recommendations.

This has already been successfully implemented in some countries and so it is expected that the peso will depreciate noticeably after the elections and possibly only then will there be some calm. International companies have so far reacted skeptically about Argentina's prospects under Milei. For example, Telefonica sold its local subsidiary to Telecom Argentina and Alsea also wants to sell its local Burger King franchise. 

There are also developments that can be observed in the crypto world. The U.S. is increasingly supporting the development of a U.S. stablecoin which would then withdraw up to 1 trillion US-dollars from emerging markets as a "Crypto USD," according to analysts from Standard Chartered. It goes without saying that such a development could jeopardize the local and monetary policies of the emerging markets. Meanwhile, Adam Gagen of Revolut said during a panel discussion "that due to the new fintech/crypto legislation in Chile, competition will be brutal."

Overview of EM Companies

"All that glitters is not gold"! This warning was already issued by the merchant of Venice – and in this sense, September was also "rich" in bonds that suffered significant performance losses:  
 
Ambipar (BRA) had financed its takeovers too expensively and is now struggling with a possible embezzlement of balance sheet funds. Although the company is a leader in the field of environmental, water and waste management and although it was profitable, the (too) high financing costs had burned money in the end. The dubious financial maneuvers that are now coming to light did the rest. We had become suspicious (UW positioning) of the developments some time ago and so we sold our very last tiny bond positions at a price level of 75%. In the end, the company's bonds were sold off to 13% of par value...

Braskem (BRA) is now looking for a suitable capital structure as the chemical market continues to fail to recover. Bonds slipped to price levels between 35-40%. We have been invested in long-term bonds (2050 maturity) for a long time and the low entry level in the cash price along with the underweight/rate curve positioning resulted in a relative outperformance compared to the benchmark. 

Raizen (BRA) suffers from its own bad investments and high cost of capital. The owners (including Shell) are not willing to invest fresh capital and so the search for a "saviour in need" is underway. We are massively underweighted here. Although we do not believe that the company is a candidate for default, the rating of "BBB" does not reflect the facts correctly for us. 

Fricon, another company from Latin America, is accused of falsifying documents. The bonds are already trading below par at 76% and fell further to 62%. Here, too, one of our management approaches to corporate bonds in emerging markets paid off - "avoid the losers", because we were and are not invested. 

The owner of Wesoda was unexpectedly arrested in Turkey on money laundering charges. Here, bonds rattled down by 10%, then recovered by plus 5-6%  after the company issued a press release saying that the owner's arrest would have no impact on the business. Since Wesoda has claims of up to 800 million US dollars from the owner and other companies in the group network, we are monitoring the situation and are maintaining our underweight position for the time being.  

Note: The companies listed here have been selected as an exmaple and do not constitute an investment recommendation.

Outlook & Performance

The technical strength of the market has faded a bit, and the previously mentioned cases serve as a warning. Risk premiums for BBB-rated companies have recently risen by 5-10 basis points due to falling US interest rates. Thanks to our prudent positioning, we were able to achieve a solid performance in our mutual funds and mandates compared to the market in September.

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

Performance opportunities for the funds:

  • Volatility in individual companies offers opportunities for generating outperformance

  • Absolute yield level remains attractive

Performance risks for the funds:

  • Asymmetric risks at individual companies (e.g. fundamentals)

  • The sometimes very divergent macro scenarios - inflation versus economic slowdown or both? - cause uncertainty

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 September 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 29.8.2025

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

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.