Luz Padilla of DoubleLine emerging markets webcast slides.

Emerging Markets Fixed Income Fund: Portfolio Performance – Quarter End September 30, 2015

Jeffrey Gundlach

Low Duration Emerging Markets Fixed Income Fund:  Portfolio Performance – September 30, 2015

Jeffrey Gundlach

TAB I – External Global Headwinds Remain

Emerging Markets Fixed Income – Headwind Starting 2015

In the February 2015 Emerging Markets (EM) webcast, we identified key risks for Emerging Markets. As the year has progressed, we have seen these risk begin to play out.

  • Country Specific Risks
    • “Terrible 3” – Argentina, Venezuela, Ukraine
    • Countries in Transitions – Brazil and Russia
    • Greece
  • Rising U.S. Treasury Yields
  • Global Growth Slowdown
  • Falling Commodity Prices

Emerging Markets Fixed Income – Challenges Ahead

Risks we see for the remainder of the year

  • Global Growth Slowdown
  • China
  • Political Risk
  • Brazil, Venezuela, Argentina, Russia
  • Potential for Rising U.S. Treasury Yields
  • Potential for Falling Commodity Prices

TAB II – Developed Market Headwinds

Emerging Markets – The Fed on Hold in September

? The FOMC maintained the target range for the federal funds rate at 0% to 0.25% at the September 17, 2015 meeting

Jeffrey Gundlach

Emerging Markets – Monetary Policy Divergence

Jeffrey Gundlach

Emerging Markets – Dollar Strength a Headwind for Commodities

Jeffrey Gundlach

TAB III – China and Falling Commodity Prices

Emerging Markets: China Equity Sell Off – Shanghai Composite Index

Jeffrey Gundlach

Emerging Markets – China has a Strong Balance Sheet

  • Reserves: US$3.6 trillion
  • Net foreign assets: US$4.4 trillion
  • Trade surplus averaged around US$45 billion a month so far this year
  • Current Account Surplus: +2.76% of GDP

Emerging Markets – China Engaged in Significant Policy Easing

  • Cutting interest rates
  • Easing Reserve Requirements for banks
  • Easing home purchase regulations
  • Easing local government debt financing

These measures typically work with lags, so we expect to see the impact over the coming quarters

TAB IV – Brazil in Focus

Emerging Markets Outlook – Brazil Political Risk

President Dilma Rousseff’s government has been trying to implement deep and unpopular fiscal and structural reforms. Congress opposition to the adjustment has led to continued fiscal account deterioration.

High level executives and politicians allegedly received kickbacks from state?oil company, Petrobras, in a corruption scandal know as Lavo Jato.

Corruption charges and policy uncertainty regarding the fiscal adjustment has led to:

  • Erosion of consumer and business confidence
  • Stalled investment and growth
  • Deterioration of fiscal account and rising debt levels
  • Loss of investment grade rating by S&P

See full PDF below.