Investment flows in the emerging markets debt have remained remarkably resilient despite asset class volatility, according to Eaton Vance.
However, the biggest challenge for the sector’s 2019 performance would be whether investors would continue to remain enthusiastic, the firm said.
Through the first week of February, there was USD $21.1 billion of inflows into EM fixed income and this included USD $10.9 billion into hard-currency bonds, USD $3.7 billion into local-currency EM bonds and USD$6.5 billion into EM bond ETFs – their second-highest inflow on record.
“Sentiment for EM actually began to turn positive last November, and looking at the trailing three-month performance shows the depth of the rebound – the EMBI returned 5.37 per cent, the CEMBI 3.29 per cent and the GBI-EM 9.83 per cent,” the firm said in the press release.
Additionally, valuations are more attractive than they were in quite a while and, according to Eaton Vance, the flows were expected to stay supportive.
At the same time, fundamentals remained a concern in some key countries and global macro risks such as slower growth, ongoing trade wars and renewed Fed rate hikes could reassert themselves.
“The need for country-specific due diligence and careful evaluation of risk factors is as important as ever,” the firm said.