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Time to boost allocations to Emerging Markets debt?

  • ,  Chief Executive |
  • 26 Sep 2018
  • Updated 04 Oct 2018

EM debt: time to boost allocations? Or is the story over?

Has recent volatility in Turkey, Argentina, and other emerging markets left asset managers with a myriad of investable opportunities, or a host of lingering concerns? Is it time to boost allocations to EM debt? Or is the emerging markets story over? 

In the list of papers below, Wellington describes the effects of a full-fledged trade war upon the emerging market environment, and other investment management groups discuss the outlook for EM debt, EM equities and EM currencies. 

em outlook

Time to boost allocations to emerging market debt? (NNIP, Sep 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
Emerging markets debt has a solid risk/return profile and attractive valuations. Our research project with MIT Sloan supports the view that increasing allocations to EMD is a good idea.

How would a trade war affect emerging markets? (Wellington, Aug 2018)
Emerging markets will not be impacted equally by a global trade war. In fact, EMs that are less dependent on the US for trade are already fairly insulated from its potential effects.

Beyond the Headlines: Making Sense of Today's EM Debt Environment (Barings, 2018)
Dr. Ricardo Adrogue, Head of Barings' Emerging Markets Debt Group, discusses risks and opportunities in today's dynamic landscape - and how investors can seek to navigate it.

US Rates Are Rising. What's Next for Emerging-Market Bonds? (Franklin Templeton, Sep 2018)
(For compliance reasons, this paper is only accessible in the EMEA region)
Franklin Templeton discusses a blended (hard-ccy and local-ccy) approach to EM bonds as well as the benefits to an active approach in emerging markets.

Argentina: Lingering Vulnerabilities in the Face of Uncertainty (PGIM, Sep 2018) 
(For compliance reasons, this paper is only accessible in the United States)
Recent Argentinian volatility could be indicative of not only a near-term crisis in confidence, but challenges that could potentially remain beyond the upcoming presidential election in 2019. 

Broadening the universe: The strategic case for alternative credit (LGIM, Aug 2018)
(For compliance reasons, this paper is not accessible in the U.S. and Canada)
Should pension schemes allocate to high yield and EMD, even after considering their falling credit spreads and the late stage of the US economic cycle? 

The state of global trade tariffs in 6 charts (Capital Group, Aug 2018)
(For compliance reasons, this paper is only accessible in certain geographies)

Given the recent rise in trade-related tensions and the extent to which retaliatory tariffs have been applied in recent months, the investment team at Capital Group have supplied 6 charts that illustrate the state of global trade. 

Emerging Markets Debt Q3 2018: Mind the Valuation (JP Morgan AM)
Both sovereign and corporate fundamentals remain strong in emerging markets, but structural headwinds also exist - such as a stronger US dollar and rising yields.

EM Roundtable: Is the emerging market story over? (Macquarie IM, Sep 2018)
Macquarie portfolio managers discuss opportunities and concerns within emerging market equities and emerging market fixed income in 2018, including insight into the causes of recent underperformance. 

Emerging Markets: Finding value in a volatile market (Capital Group, Aug 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
Contagion within emerging markets can spell opportunity for active portfolio managers.  Capital Group looks at three key areas of emerging markets that they are watching currently and other places value may exist within EM.

Asian Fixed Income Monthly Outlook (Nikko AM, Sep 2018)
With added insight into the macroeconomic and currency-related outlooks for the region, Nikko Asset Management presents their monthly perspective on Asian fixed income markets. 

Investment Outlook Q4 2018: The uncharted path (Fidelity International)
(For compliance reasons, this paper is only accessible in the UK and Europe)
Fidelity International presents their multi-asset investment outlook for Q4 of 2018.  How long will the present bull market last, and what are the similarities between present EM turmoil and past crises?

Exchange Rate Predictability in Emerging Markets (Amundi AM, Jul 2018)
This quantitative paper by Amundi Asset Management attempts to predict currency returns (for five Latin American currencies) using several macroeconomic and financial variables.