EM's fallen angel risk low, keeping an eye on Colombia - PIMCO

* Current risk of fallen angels is "relatively low" -PIMCO's Rahman

* Investors are examining Chinese corporate bonds more closely after Huarong saga

* Colombia's fiscal reform key to preserving current debt rating

By Aaron Saldanha

May 7 (Reuters) - The investment-grade debt of emerging-market countries faces a relatively low risk of being downgraded to "junk" status, a portfolio manager at bond giant PIMCO said on Friday.

"Of the names at risk, it's no surprise that Colombia is the one to watch, here fiscal reform will be key," said Lupin Rahman, head of emerging markets sovereign credit on the portfolio management team at PIMCO, which manages about $2.16 trillion in assets.

Colombia's recent efforts to hike taxes have yielded protests and a new finance minister. Mauricio Cardenas, a former Colombian finance minister, said this week he believed a reform producing 1% of the gross domestic product in revenues is needed to preserve the current rating.

Meanwhile, PIMCO's Rahman told the Reuters Global Markets Forum that international investors in Chinese corporate bonds could use government debt "as a risk-mitigating instrument" amid possible underperformance of state-owned enterprises' debt.

The country's corporate bonds were jolted last month by fears around the debt repayment ability of state-owned bad loan giant China Huarong Asset Management Co, which Fitch Ratings downgraded even as Huarong companies met some deadlines.

Rahman said investors were now looking more closely at how implicit guarantees are triggered in China, the extent of information opacity and the quality of regulation, especially in the non-bank financial sector.

Higher commodity prices this year have been positive for developing world countries, Rahman said. While Rahman expects the current inflationary dynamics to be transitory, she is still monitoring their potential "second round" effects on inflation expectations and core inflation.

A continuation of factors including global liquidity, higher commodity prices, the pandemic's evolution and the domestic policy response are components of Rahman's "central thesis" for investments in local currency debt.

Inflation, in the United States and globally, overtook COVID-19 as investors' biggest perceived challenge to prospects of EM assets, a recent HSBC investor survey showed.

"This may reflect fears (that) reflation and a potential tapering of asset purchases by central banks might lead to a sell-off in EM assets, similar to the 2013's 'taper tantrum'," the bank said.

(These interviews were conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: https://refini.tv/33uoFoQ) (Reporting by Aaron Saldanha and Lisa Mattackal in Bengaluru; Editing by Divya Chowdhury in Mumbai and Aditya Soni)