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Michael Hasenstab Bond Investment Strategy 2012

Michael Hasenstab, who oversees more than $150 billion of global fixed-income assets at Franklin Templeton Investments, said he would prefer to gain exposure to China indirectly though Korean, Singaporean and Malaysian bonds until Asia’s largest economy opens up its capital account.  But he likes Hungarian government bonds because of “pretty significant yields” and “in the case of Hungary you are paid to wait”.

Michael Hasenstab is the fund manager for FTIF-Templeton Global Bond and FTIF-Templeton Global Total Return fund.  According to him “All of Asia has a tremendous indirect exposure, whether it’s macroeconomic exposure, or simple currency correlation. If China moves down this path of solid, be it double-digit or 7 % growth, that gives a boost to Asian exporters. If the currency gradually appreciates, that’s going to pull the rest of Asia along with it. Korea, Malaysia and Singapore are structurally very tied to the China growth engine.”  Investing in their bonds “is the only meaningful exposure until China opens its capital account and allows direct investment.

The headquarters of Franklin Templeton Investm...

The headquarters of Franklin Templeton Investments at One Franklin Parkway, San Mateo, California. Photographed on June 29, 2007 by user Coolcaesar. (Photo credit: Wikipedia)

On the other hand, he is upbeat on his investment in Hungarian government debt as he sees the country of good long term

fundamentals.  In his opinion, the Hungarian government has been doing “structural reforms that most of Europe hasn’t touched which include raising retirement ages and the country is also benefiting from its economic linkage with German exports.

Templeton is the biggest owner of the 2022 bonds with 6.8% of the outstanding amount at the end of last year.  The Hungarian bonds have returned 12% this year in dollars terms, the biggest gains worldwide.

The chart below illustrates the year-to-date performance of FTIF-Templeton Global Bond and FTIF-Templeton Global Total Return:

image

Reference:

    1. Bloomberg, 2012-04-16, “Templeton Voicer”
    2. Bloomberg, 2012-04-16, “Templeton Likes Hungarian Bonds as IMF Aid Dispute ‘Trivial’”