NewsWhore
05-09-2007, 07:00 PM
Bear Stearns is bullish on Dominican investment and capital markets issues. "As order has been restored to DR's monetary accounts and overall macroeconomic conditions have improved, benchmark rates have sharply declined, with yields on the Central Bank's 12-month zero-coupon bills, the instrument of choice of institutional investors, sliding to 9.35% at the moment from 12.5% at the beginning of the year and 15.7% a year ago," reports Franco Uccelli, who follows the DR for the Wall Street brokerage firm.
Uccelli writes: "Indeed, the trend has been for yields on one-year wholesale paper, which are negotiated, to converge towards the rates paid on 12-month retail paper, which are set by the Central Bank."
He forecasts: "With one-year retail rates standing at 9%, we believe that it is only a matter of time before institutional rates reach those levels."
Nevertheless, he comments that the reduction in yields is partly being offset, from the perspective of foreign investors, by the revaluation of the Dominican peso, which has appreciated by 3.9% so far this year.
But he observes that "having already dipped to historic lows, we believe that additional upside to local yields is somewhat limited, which makes investing in the DR's local market more a bet on the currency than a play on rates. With foreign capital inflows (exports, remittances, tourism, FDI) expected to remain strong and a tight monetary policy firmly in place, expectations of a further revaluation of the peso seem realistic, in our view. He concludes: "a strong currency will continue to make investing in DR's local market attractive for foreign investors."
More... (http://www.dr1.com/index.html#3)
Uccelli writes: "Indeed, the trend has been for yields on one-year wholesale paper, which are negotiated, to converge towards the rates paid on 12-month retail paper, which are set by the Central Bank."
He forecasts: "With one-year retail rates standing at 9%, we believe that it is only a matter of time before institutional rates reach those levels."
Nevertheless, he comments that the reduction in yields is partly being offset, from the perspective of foreign investors, by the revaluation of the Dominican peso, which has appreciated by 3.9% so far this year.
But he observes that "having already dipped to historic lows, we believe that additional upside to local yields is somewhat limited, which makes investing in the DR's local market more a bet on the currency than a play on rates. With foreign capital inflows (exports, remittances, tourism, FDI) expected to remain strong and a tight monetary policy firmly in place, expectations of a further revaluation of the peso seem realistic, in our view. He concludes: "a strong currency will continue to make investing in DR's local market attractive for foreign investors."
More... (http://www.dr1.com/index.html#3)