Western Asset to reduce exposure in Egypt and Malaysia

By Cristal Cody

Tupelo, Miss., Oct. 22 - Western Asset Management Co. intends to further reduce its exposure to emerging markets in Egypt and Malaysia this month after eliminating its risk in other developing countries over the summer, a portfolio manager said Wednesday.

"The markets have performed well, but we feel in this environment, it makes sense to reduce our risk further," Keith Gardner, portfolio manager for emerging markets debt for Western Asset, said during a Legg Mason Inc. conference call to discuss the latest market events.

Over the summer, Western Asset reduced its risk in the Brazilian markets, eliminated its exposure to Turkey and eased the local market exposure in Indonesia and India, he said.

In other news, Gardner noted that traditional dollar-denominated sovereign debt is down more than 16% through Tuesday and more than 20% year to date.

"Today was a particularly bad day. These returns are actually very similar this month to what we've seen in the equity market," he said.

In the corporate sector, returns are similar and the local markets are down almost 15% this month.

"In Russia, some corporate bonds and sovereign bonds have underperformed due to liquid markets, but there's still some good value on that sector," he said.

Gardner said he sees long-term value in corporate bonds with solid companies in emerging countries that could be competitive with businesses in developed countries.

"They trade as low as 50 cents on the dollar, so we think there is considerable long-term value here," he said.

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