We highlight six conditions that we believe create an attractive entry point for EM local debt investments, and believe those conditions are intact.
Current high local interest rates, the prospect of a softer US dollar, and monetary easing are among the factors.
Idiosyncratic differences in growth and macroeconomic performance should create a diverse and lucrative opportunity set for EM local debt in the second half of 2024.
Monetary easing around the world is improving the prospects for emerging market (EM) local debt and unlocking unique investment opportunities. With further easing likely, we expect a diverse and lucrative opportunity set for EM local debt in the second half of 2024, driven by attractive income potential and stronger growth relative to developed markets. Here are six conditions that we believe create an attractive entry point for EM local debt investments.
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Important information
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Non-investment grade bonds, also called high yield bonds or junk bonds, pay higher yields but also carry more risk and a lower credit rating than an investment grade bond. The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
The performance of an investment concentrated in issuers of a certain region or country is expected to be closely tied to conditions within that region and to be more volatile than more geographically diversified investments
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