Remain invested, favor Eurozone - Second part

by Oddo BHF Asset Management




How long can the government ensure the balance between credit and growth ?



- The economy continues to decelerate gradually to a more sustained speed of around 5% in the medium term. It is expected to slow in Q2 17, but also to transform itself toward more consumption and services
- Beyond the growth objectives, the authorities are looking to curb financial excesses and to diversify in and outflows channels. State Owned Enterprises (SOE) restructuring remains the weak link of the current reforms
- The PBoC launched new tools to monitor more closely the shadow banking activity and financial outflows. FX reserves have stabilized and credit growth decelerates compared to its trend (according to the latest BIS calculations).
- Great diplomatic activity to reinforce the “one belt one road” policy 

Sources: ODDO BHF AM SAS, Thomson Reuters, Datastream. Data as of 31/05/2017




Emerging market fixed income

Carry on !


- Emerging market debt has recovered from the derating in the aftermath of D. Trump’s election.
- The asset class has become one of the favorite's carry trade tool among investors, with respectable flows coming in. Debt in local and hard currencies both exhibit a 6.8% performance YTD (as of end of May). Local currencies remain undervalued globally against the USD given the current macroeconomic context.
- A significant part of the performance comes from the recent rally in US Treasuries. The spread may nevertheless have further to go, particularly if the macro environment remains so stable and without volatility.
- The main systemic risk lies probably in oil : if it falls too much, sovereign funds of oil producers may have to sell (heavily) US Treasuries. Then, the Venezuelan situation is to be monitored, as its bonds weight around 5% of the EMBIG and contribute a fifth of its returns. And the opposition to M. Maduro has threatened to default on some of PDVSA’s bond issues. 

Source: ODDO BHF AM SAS, June 2017



What are the risks ahead ?



Scenarios for 2017


Any opinions presented in this document result from our market forecasts on the publication date. They are subject to change according to market conditions and ODDO BHF Asset Management SAS shall not in any case be held contractually liable for them.


Our current convictions for each asset class – central scenario






Nicolas Chaput
Global CEO & Co-CIO

Laurent Denize
Global Co-CIO

Gunther Westen
Deputy Head of Asset Allocation



Oddo BHF AM is the asset management division of the Oddo Group. It is the common brand of two legally separate asset management companies: Oddo BHF AM SAS (France) and Oddo BHF  AM GmbH (Germany).This document, for market communication, has been drawn up by Oddo BHF ASSET MANAGEMENT SAS (ODDO BHF ASSET MANAGEMENT SAS) and is exclusively dedicated to professional clients (MIFID). It may not be circulated among the public.The investor is informed that the strategy presents a risk of capital loss, but also many risks linked to the financial instruments/strategies in the portfolio. The value of the investment through this strategy may vary both upwards and downwards and may not be returned in full. The investment must be made in accordance with investors’ investment objectives, their investment horizon and their capacity to deal with the risk arising from the transaction. ODDO BHF ASSET MANAGEMENT SAS cannot be held responsible for any direct or indirect damages resulting from the use of this document or the information contained in it. This information is provided for indicative purposes and may be modified at any moment without prior notice.Investors are reminded that past performance is not a reliable indication of future returns and is not constant over time.  Performance are presented net of fees except the potential subscription fee charged by the distributor and the local taxes. Any opinions presented in this document result from our market forecasts on the publication date. They are subject to change according to market conditions and ODDO BHF ASSET MANAGEMENT SAS shall not in any case be held contractually liable for them.





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