JOHANNESBURG/NAIROBI: International bonds issued by smaller, riskier, emerging economies suffered another sharp selloff on Wednesday after President Donald Trump’s eye-watering 104 percent tariffs on China took effect, re-igniting turmoil across global markets.
Pakistan’s longer-dated dollar-denominated bonds tumbled more than 6 cents to be bid below the 70-cent threshold where debt is seen as distressed, Tradeweb data showed.
Longer-dated bonds, issued by Sri Lanka, Nigeria and Egypt, were all down between 3.5-4.5 cents, although trading was thin, according to market participants.
Debt in smaller emerging markets, known as frontier markets, has suffered sharp selloffs since Trump announced a raft of sweeping tariffs last Wednesday, with many bonds in the asset class losing 10 cents or more over the past week.
The latest rout is boosting the cost of borrowing for those economies, with many of the bonds seeing their yields in the double digits, a threshold that makes it unpalatable for them to tap international capital markets.
“There are some concerns in the market that Frontiers will find it more difficult in the future to raise external funding due to the external market developments and possibly persistent loss in risk appetite,” said Gergely Urmossy, senior frontier markets strategist at Societe Generale.
This could lead to more currency weakness in those economies over the medium term and curtail the space for central banks to lower interest rates to shore up their economies, he added.
Many frontier market governments, especially African sovereigns, had only recently returned to Eurobond markets.
They had lost access for some two years when the fallout from COVID-19 and Russia’s
full-scale invasion of Ukraine sent inflation sharply higher and fueled a global interest rate-hiking cycle that priced those governments out, and helped push Ghana and Zambia into default.
Razia Khan, head of research, Africa and the Middle East at Standard Chartered, said the latest set of tariffs had fueled more concerns over global growth.
“Frontier markets, especially at the lower end of the ratings spectrum, are seen as more vulnerable when risk-off sentiment grips markets,” she said.
Small emerging market dollar bonds resume selloff, Pakistan drops more than 6 cents
https://arab.news/wrrg9
Small emerging market dollar bonds resume selloff, Pakistan drops more than 6 cents
- Debt in smaller emerging markets has suffered sharp selloffs since Trump announced tariffs
- The latest rout has pushed borrowing costs higher for countries like Pakistan, Egypt and Sri Lanka
Saudi Arabia, Middle East infrastructure and AI to drive next rotation of global capital, says BNY executive
- Hani Kablawi: I’m excited about (Saudi Arabia) coming out in force, reaching out to the investor community, saying: ‘Tell us what you need to see’
- Kablawi: We (BNY) are one of, within our peer group, the biggest investors in both AI and in digital assets
DAVOS: As global markets contend with heightened volatility and shifting capital flows, the Middle East — and Saudi Arabia in particular — is positioning itself as a destination for long-term investment, according to Hani Kablawi, senior executive vice president and head of international at BNY.
Speaking to Arab News at the World Economic Forum in Davos, Kablawi pointed to the region’s increasing engagement with international investors, combined with large-scale infrastructure ambitions, as key factors shaping where global capital could move next.
“The really exciting thing for me in the Middle East is it isn’t one thing,” Kablawi said. “It’s very different. Demand profiles are very different, investing structures are very different, and what they’re looking to achieve is very different in different places.”
Saudi Arabia, he said, was standing out for its approach to the global investment community.
“I’m excited about (Saudi Arabia) coming out in force, reaching out to the investor community, saying: ‘Tell us what you need to see’,” he said.
“We, Saudi, are united in our approach to the international global investment community, and we are able and willing to make the changes necessary to be a destination of capital and foreign direct investments over the next few years.”
While foreign direct investment into Saudi Arabia has increased significantly in recent years, Kablawi pointed out it remains from a relatively low base.
“FDIs in Saudi have gone up fourfold over the past few years,” he said, adding there was still substantial headroom for growth.
He said the Kingdom understands what international investors require, particularly around transparency, data and risk-return profiles.
Saudi Arabia also benefits from the presence of government and semi-state entities that can help de-risk projects.
“They have the structures also to provide a good risk-return trade-off,” he said, pointing to partnerships involving national funds and government-linked investors.
Major infrastructure investment is central to that strategy, spanning transportation, aviation, ports, logistics, rail and economic cities.
“They have announced the big projects. We know what they look like,” Kablawi said. “Now it’s about the structuring of those projects in a way that attracts investment.”
Globally, capital flows remain heavily concentrated in the US, even during periods of market stress. Drawing on BNY’s data, which covers $58 trillion in assets under custody and administration, Kablawi said US assets continue to sit above long-term trend lines.
“US equities currently represent 64 percent of our total equity holdings, and government securities in the US are 72 percent of our total holdings,” he said.
During the market volatility seen last April, he added, holdings in US Treasuries fell only marginally.
“That represented two things,” Kablawi said. “One is, from a reserve currency status perspective, no alternatives yet. And from an equity perspective, continued interest in the Magnificent Seven (seven dominant US technology giants), tech stocks, AI, and the accessibility of those investments to global investors.”
Looking ahead to 2026, BNY’s analysts expect interest rate easing in the US, alongside a broadening of equity investment beyond the largest technology names. Kablawi also highlighted Europe as an area where both equities and fixed income remain underheld, despite growing infrastructure ambitions across the region.
“There’s a lot of demand for infrastructure investment all around the world,” he said, pointing to announced spending in the UK, Germany and the Middle East.
“In 2026, we’re going to be watching and hopefully helping with some of those rotations going towards long-term productive finance,” he added.
Technology is another defining theme.
Kablawi said BNY is focusing on areas it can control, particularly investment in artificial intelligence and digital assets.
“We are one of, within our peer group, the biggest investors in both AI and in digital assets,” he said.
Since last year, BNY has rolled out more than 130 AI use cases into production and made its enterprise AI platform available to all employees.
He added the firm now has around 140 “digital employees” supporting day-to-day operations.
“The connectivity between traditional finance and digital finance will grow,” Kablawi said. “The rails that exist that BNY is offering between traditional finance and digital finance will continue to grow.”
Looking ahead, he stressed progress will depend on continued innovation: “Anybody who’s got a little bit of an early mover advantage, it’s only an early mover advantage,” he said. “A lot of people will be pushing into it. You can never be complacent, but we like where we are.”
