Emerging market debt (in USD terms) experienced a good April, supported by a partial retracement in cross-market volatility, improvement in EM currencies’ carry-to-vol ratios, and stabilization in US rates. COVID-19 remains a pertinent concern for EM amid increasing divergence between EM and DM in terms of COVID cases – a number of EM countries are struggling to contain new waves of infection, most notably in South-East Asia and parts of Latin America (LatAm). Against the backdrop of a strong global growth recovery and highly accommodative policies ensuring liquidity, it seems likely that political and country-specific developments will continue to drive differentiation within the EM universe. However, overall the current environment seems favourable for a gradual compression of risk premia across EM assets, particularly higher-yielding EM FX appreciation, especially given this segment’s recent underperformance. Overall positive flows of +$3.3bn and +$1.0bn into hard currency and local currency, respectively, were recorded in April. (Source for flows data: Morgan Stanley).
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee 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.
Images of NYSE Group, Inc. are used with permission of NYSE Group, Inc. Neither NYSE Group, Inc. nor its affiliated companies sponsor, approve of or endorse the contents of this program. Neither NYSE Group, Inc. nor its affiliated companies recommend or make any representation as to possible benefits from any securities or investments.