Deutsche Bank NYSE:DB, Germany's largest lender, has indicated that its private banking arm may consider buying emerging Asia bonds if oil prices stay low enough to reduce inflation pressure and bring yields lower. Jacky Tang, chief investment officer for emerging markets at the bank's wealth-focused division, said in an interview Tuesday that the bank would feel more confident looking at markets such as Indonesia and India if crude remains near $65 to $70 per barrel for around two months. These markets may matter more to investors because both economies are among the Asian countries most exposed to higher energy costs.
Brent futures had traded around $72 per barrel for more than a week before moving above $80 on Wednesday after the U.S. launched fresh military strikes on Iran. The increase in oil prices was followed by higher global bond yields, suggesting investors were becoming more cautious about the risk of inflation and potential rate hikes. Tang said emerging-market bonds are unlikely to see meaningful traction until traffic through the Strait of Hormuz fully resumes, reflecting how geopolitical disruption may still limit investor appetite.
Tang also said this is not yet the moment when investors are turning broadly bullish because of the global situation. He added that if energy prices in Indonesia and India remain depressed for three to six months, investors may start to believe that trade balances in those countries are improving compared with before. Tang does not currently hold Indonesian bonds and has not had a significant position since becoming CIO last October, suggesting Deutsche Bank's private arm is still waiting for a more durable oil-price signal before increasing exposure.