60 seconds on the top country picks in EMD
With the lengthy era of slack monetary policy probably drawing to a close, Abdallah Guezour outlines where he sees the risks and best rewards.
We believe that the era of easy monetary policy has probably come to an end, and this has serious implications for investors in bond markets globally. Within this context, the outlook for emerging markets is particularly challenging for US dollar denominated sovereign and corporate bonds.
These are likely to suffer from a toxic mix of low yields, poor liquidity and heavy exposure by portfolio managers. However, there are attractive opportunities in a number of emerging market local bonds and currencies, which have already seen a major repricing during the bear markets of 2013 and 2015.
This is why investors should be very flexible and opportunistic in local debt markets; focusing on the great pockets of value that have recently emerged in countries such as Argentina, Brazil, Mexico, Russia, South Africa and Indonesia. These countries still offer high yields and relatively cheap currencies.