Emerging Markets Local Debt: Ready for Takeoff?
After several challenging years, emerging markets countries are experiencing gradual but steady growth.
We believe emerging markets local debt (EMLD) has reached an important inflection point as fundamentals, valuations, and technicals have all improved. After several years of decelerating economic growth and challenging market conditions, we are starting to see a positive shift in both structural and cyclical fundamental trends across most emerging markets (EM) countries. Both interest rates and currencies offer an attractive risk premium relative to their developed-markets counterparts. In addition, inflows are returning to the asset class as market participants seek to reengage with what has been an out-of-favor market segment.
All investments are subject to risk, including the possible loss of principal. Fixed Income risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall; these risks are currently heightened because interest rates are at, or near, historical lows. Loans can be difficult to value and highly illiquid; they are subject to credit risk, bankruptcy risk, and insolvency.