Positive outlook for emerging markets

The outlook for emerging markets remains positive, despite some significant headwinds experienced over recent months, according to Neuberger Bergman specialist, Gorky Urquieta.

In an analysis issued this week, Urquieta claimed the near-term outlook for emerging debt markets was cautious but added that his company believed the asset class had hit an inflection point of market adjustments with the potential ‘beginning of the end' of ultra-easy global monetary conditions.

"Despite recent ‘noise' to the contrary, emerging market economies are generally expected to improve and remain stronger than their developing market counterparts," he said.

"The financing needs of sovereign and corporate issuers are relatively moderate, potentially limiting supply and supporting credit fundamentals and spreads."

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"In general, we believe that, recently, investors have made too much of slowing growth in emerging markets and we expect some economic resurgence, supported by global recovery, which should partially offset China's slowdown, even as emerging market policymakers gradually scale back monetary support.

"We believe that slow, steady economic improvement could provide a modestly positive backdrop for emerging market debt, particularly in comparison to other sectors within fixed income."

Urquieta said that emerging market debt should also continue to benefit from the long-term trend of inflows, as investors within fixed income add exposure to emerging markets, which are structurally underrepresented in their portfolios.

Originally published on SMSF Essentials.