Emerging market debt experienced pockets of respite towards the end of October, exhibiting some stability after the volatility and headwinds of the third quarter. Despite rigidity in EM fundamentals, the possibility that the US Federal Reserve might be more measured in its monetary tightening approach going forward provided some relief, as did a partial recovery of EM currencies against USD and retracements in bond yields. The particular inflation dynamics among various EM economies mandated EM central banks to act at different times and with varying magnitudes. This is especially the case in EMEA and Latin America (LatAm), where the tightening cycle is more advanced, and where inflation is expected to peak in Q4.
A key factor in early October was OPEC’s (Organization of the Petroleum Exporting Countries) move to cut its crude oil production by 2 million barrels per day, starting in November. This should bolster prices and benefit the EM oil exporters. China has maintained its focus on policy continuity, with no immediate actions announced on potential reopening and growth stimulus. The meeting between the International Monetary Fund (IMF) and World Bank (WB) in mid-October did little to address investor concerns about the global macro outlook and downside risks were highlighted. Tunisia and Egypt indicated they were close to agreements with the IMF for funding.
In EM sovereign credit, year-to-date spreads have widened to their highest in a decade. This impacted investor sentiment, raising further concerns about the outlook for capital flows into EM bond funds.
During October 2022, hard currency outflows were -$4.4bn, while local currency outflows amounted to -$5.6bn, according to JP Morgan.
This website is intended for persons resident in Australia. State Street Global Advisors, Australia Services Limited ABN 16 108 671 441, AFSL Number 274900 ("SSGA, ASL") is the product issuer. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager. The material on this website is general information only and does not take into account your individual objectives, financial situation or needs.
You should seek professional advice and consider the Product Disclosure Statement (PDS) and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
You can access our PDS online or by calling us. The offer made in our PDS is available to persons receiving the PDS within Australia and applications from outside Australia will not be accepted. Past performance is not a reliable indicator of future performance. Investing entails risks and there can be no assurance that State Street Global Advisors will achieve profits or avoid incurring losses.
Investing involves risk including the risk of loss of principal. This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information. Performance quoted represents past performance, which is not a reliable indicator of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.