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Huawei is biting away at Apple

Corporate bonds in world emerging markets were relatively stable in October. Tighter credit margins contributed positively while rising US market interest rates acted in the opposite direction. The US Senate’s thumbs-up to the proposed state budget contributed to the rise in interest rates and was seen as a first step towards the tax reforms that are intended to lead to reduced corporate and income taxes.

The portfolio’s exposure to Chinese telecom company Huawei was increased; we regard its bonds as strong investment grade debt. However the company has no official rating from the leading credit institutions, which means we get paid a little better for our exposure. Huawei’s operations range from the expansion and maintenance of infrastructure for mobile and data traffic to typical consumer products like mobile phones and tablets. A third leg, mainly targeted at businesses, includes wireless networks, video conferencing and cloud services.

The company is experiencing solid growth and in recent years has gained an ever-increasing market share for smartphones. Behind Samsung, Huawei is now approaching Apple and it would not be impossible for the company to soon take second place among smartphone manufacturers. Despite its solid growth and major investment in research and development, Huawei has a very strong balance sheet with good liquidity and net cash, which means we see a minimal refinancing risk for the company’s bonds.

The overall portfolio moved somewhat higher in October, and the fund rose 0.11 percent in total this month.

Carnegie Emerging Markets Corporate Bond invests in debt in the world’s emerging markets. The portfolio consists of bonds with a credit rating equivalent to both investment grade and high yield, which contributes to a balanced portfolio. The fund is therefore a good option for those seeking exposure to these regions while at the same time wanting relatively low risk.

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