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Fidelity sees refuge in bonds linked to inflation, Chinese debt and US ‘value’

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Fidelity sees refuge in bonds linked to inflation, Chinese debt and US ‘value’

This concludes the presentation of the ‘2022 Analyst Survey’ carried out in Madrid by Sebastián Velasco, General Director of Fidelity International for Spain and Portugal. “The lack of visibility that we have in the market right now is enormous and except for a resolution of the conflict in Ukraine we believe that this year the flows to funds will be negative”, he comments.

The US manager explains that in the first days of the Russian invasion of Ukraine there were no significant refunds, although it was given a week later when President Vladimir Putin’s planes advanced and Western countries responded with harsh sanctions against Russia’s economy. “We have zeroed out Russia exposure within our emerging fundsbut no fund is closed to buy or to sell”, he adds.

Russia is facing default on its dollar debt due to international sanctions and the Moscow stock market has been closed since the war began three weeks ago. The country must face the payment of 115 million in interest and the rating agency Fitch defends that any effort in dollars to change interest payments to rubles would indicate that “default has begun.”

“There is a part of the disbursements that have gone to liquidity. Our clients have demanded us these days quality information and agility in the information. Now they are already showing for interest funds in which they were invested and especially for emerging markets. In the long term, we believe that China is the region to be in due to the undervaluation it presents and its growth”, indicates Velasco. In the current situation, Fidelity maintains that China is striking a difficult balance between Russia and Western countries. In fact, China’s economy depends more on exports to the US and Europe than it does to Russia.

From Fidelity they also overweight the Japanese stock market in equities and reduce exposure, for the time being, to the markets of the Old Continent. He also believes that the demand for sustainable funds will continue, with more and more investors interested in impact funds. From the American manager they believe that all regions are improving environmental, social and governance criteria and highlight the progress that Chinese companies are making. “50% of Chinese listed companies have a greater emphasis on most of their ESG policies,” they underline.

However, he believes that companies and States still have to do a lot to reach zero emissions by 2050 and high inflation complicates this goal. For many companies, reaching zero emissions by 2030 seems too ambitious a goal. The general director of Fidelity International for Spain and Portugal also maintains that regulators must delve into regulation and transparency when it comes to cataloging sustainable funds at a European level through the regulation on the disclosure of information related to sustainability in the sector of financial services (SFDR).

On a macroeconomic level, he believes that stagflation in Europe, that is, high inflation accompanied by stagnant growth, creates an opportunity for bonds linked to rising prices and also to approach China’s sovereign fixed income for its Returned

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