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Financial Times: foreign investors bet on Uzbekistan and Tanzania

Foreign investors are showing increasing interest in Uzbekistan and Tanzania, writes the international edition of the Financial Times.  

The race for higher returns is pushing investors to explore new markets, analysts say. Also, entrepreneurs are looking for assets that do not depend on assets in larger developing countries.

For example, on Monday the European Investment Bank issued the first-ever banknote in national currency – in Georgian lari. Thus, the financial regulator reacted to the surge in demand for high-yielding, but more risky debt obligations in previously undeveloped countries.

Craig McLeod, head of emerging markets at the electronic bond trading platform MarketAxess, explained this.

According to him, the relatively low profitability of many fixed-income assets is shifting the focus of investors to less popular markets – Kazakhstan, Serbia, Egypt, and others, where short-term bonds can bring income up to 8%.

We are seeing growing demand and larger transactions in the offshore markets in local currencies, “said Dutch Development Bank Treasury Chief Matthijs Pinksteren.

He noted that the Uzbek government’s recent $ 50 million offshore bonds in local currency were in high demand.

According to him, the offer for these bonds significantly exceeded the offer.

Since 2015, 270 bonds pegged to national currencies have been sold, worth almost $ 5 billion.

Recently, analysts at investment firm TCX Investment Management Company launched an index of untapped market currencies to make it easier to access.

And it turned out to be useful – as noted by TCX Executive Director Ruurd Brower, some investors are very interested in the market of Papua New Guinea, Uzbekistan, and Tanzania.

“By investing in these markets, we aim to reduce correlations with the larger emerging market currencies and at the same time generate returns that reflect the local macroeconomic backdrop,” said Macquarie Group Investment Manager Gyula Toth.

However, there are risks as well. Interest in these bonds will largely depend on how quickly, according to investors, the US Central Bank will react to rising inflation, since higher yields in the United States will reduce the attractiveness of border markets.