Opportunity in EM debt despite volatility
Emerging markets debt (EMD) inflows have decreased as investors have reacted to concerns over the trade wars, global growth and a shifting political landscape in Argentina, according to Eaton Vance.
In the first half of 2019, US$45.1 billion flowed into EM debt funds, compared to only US$18.7 billion in 2018, according to JP Morgan, but those flows turned negative two weeks ago.
The emerging markets debt team at Eaton Vance said despite the volatility, they were still constructive on the asset class and country selection would become important as the rally matured.
“Amid all the news and noise last week, Ukraine posted a great Q2 gross domestic product (GDP) number,” the Eaton Vance EMD team said.
“Ukraine has a reformer president, Volodymyr Zelensky, who rode to victory on a strong wave of discontent earlier in the year, and in the past few weeks his party secured a parliamentary majority.
“Another nice data point that didn't make the news last week was the strength of Egypt's non-oil exports. Egypt's reform progress over the past two years has been impressive.”
They said for most of the year EMD had benefited from the tailwind of falling rates, but they believed country selection would become more important as the broad-based EMD rally faded.
AUTHOR
Chris Dastoor
Recommended for you
First Sentier Investors chief executive, Mark Steinberg, is set to depart the asset manager after seven years.
Metrics Credit Partners has completed the acquisition of Taurus Finance Group and BC Investment Group as it looks to launch consumer lending arm Navalo.
AMP has announced to the ASX that it is being sued by property fund manager Dexus regarding the sale of its real estate and domestic infrastructure equity business.
Having seen inflows of US$5.6 billion to its fixed income funds in the last quarter, Janus Henderson has closed on a deal with life insurer Guardian to secure funds to boost its product development.
