This Week's Strategy Espresso

ETF Education

Hunt for yield continues in EM Debt space

9 December 2019

Heading into 2020, we continue to expect emerging market (EM) local currency debt to perform well relative to other strategies. With a potential phase one trade deal on the horizon, a mix of supportive factors could help to drive the asset class, including:

  • Economic growth differential as EM countries are expected to  rebound at 4.6% growth in 2020 versus 1.7% for developed economies.
  • Accommodative global central bank policies pump liquidity back into the system
  • Weaker inflation leads to increased real yield differential, supporting   investor flows.
  • EM currencies undervalued versus the USD – currently c. 5.6% undervalued for the Bloomberg Barclays EM Local Currency Liquid Government Index.1

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