External debt looks good

Merrill Lynch and Barclays Capital’s ratings recommend Lebanese Eurobonds

The two investment banks Merrill Lynch and Barclays Capital gave positive outlooks on Lebanon’s external debt.
Merrill Lynch has upgraded its recommendation on Lebanon's external debt to 'Over Weight', from 'Market Weight', in its model portfolio of emerging markets debt. It raised the country’s allocation in the portfolio to 3.9 percent from 3.5 percent.

Lebanon's external debt rating placed it in the same category as Abu Dhabi, Jordan, Qatar, and the Philippines. Its allocation is the second highest among countries with an 'Over Weight' recommendation, behind the Philippines.
Merrill Lynch attributed its recommendation on Lebanese Eurobonds to their low correlation with international markets, given increased global risk aversion. It said that the main risk for the country remains contagion spillovers from the unrest in Syria.

Barclays Capital maintained its recommendation on Lebanese Eurobonds at 'Market Weight' in its emerging markets credit portfolio. It raised the country’s allocation in the portfolio to 2.8 percent from 2.4 percent. Lebanon's allocation is the second highest among countries with a 'Market Weight' recommendation, behind Argentina.

Barclays said that the recent global market turmoil has had a limited effect on Lebanese credit spreads. It said that Lebanon's external debt may be an attractive asset class to temporarily increase allocations in an environment of global market uncertainties. However, it cautioned that political risks in the country remain elevated.