Emerging market debt

Credit is an asymmetric asset class. The upside is a coupon payment and limited capital appreciation; the downside is a default to zero. For all maturities and bond types, ESG integration can play a crucial role in mitigating risk.

Trend rates of economic growth, which have been on the decline for decades in the world’s leading economies, look set to fall further. That will have big implications for governments, companies, households and investors, argues Stewart Robertson.

Relatively low vaccination rates, slowing Chinese growth, and terms of trade gains that may have largely peaked mean emerging market economies face several headwinds in 2022. Varying degrees of resilience and vulnerability are likely to result, argue Nafez Zouk and Carmen Altenkirch.

The International Monetary Fund (IMF) annual meetings are always a chance to reflect on the key trends affecting emerging markets. This year was no different. Carmen Altenkirch and Nafez Zouk engaged with policymakers and delegates to ascertain the real impact of the COVID pandemic on growth, fiscal metrics, and debt burdens.

Investors in China should view recent interventions by the government in the context of its history and longer-term strategic ambitions, argues Amy Kam.

In the latest instalment of our visual series on topical data themes, we look at the latest IPCC report, the significant decline in US real yields and people’s live TV versus streaming habits.

US Treasury yields have fallen appreciably in recent weeks, seemingly dismissing the threat of rising consumer prices. Some investors could be in for a nasty surprise if inflation proves more intransigent than anticipated, argue Michael Grady and Katarina Cohrs.

Emerging market debt investors need to keep a watchful eye on food price inflation as a potential key driver of monetary policy, especially as this has not coincided with a weaker US dollar, argues Nafez Zouk.

Like Washington and Brussels, Beijing is worried about the growing power of large technology companies. But China’s regulators are taking swifter, more radical action than their peers in the West.

Regulatory authorities around the world are targeting the big US tech giants. However, while investors need to keep a watchful eye on developments, Big Tech’s stranglehold and influence on numerous economic sectors will be hard to loosen.

The advent of tougher regulations after the global financial crisis led investors to think banks were safe. Was the Archegos scandal a wake-up call or much ado about nothing?

Deciding when to tighten the purse strings and hike taxes is complex at any time, and even more so when the economic fallout from COVID-19 remains unclear. Getting deficits – the gap between government spending and income – under control will need to happen eventually, but it would be a brave government that pursued such a goal now.

The market for sustainable bonds to fund activities that have a positive impact on the environment or society is booming. But there are many factors to consider before investing. Not least among them is a crucial question: is your money really being used to fund the activities promised?

Debate over the short- and longer-term consequences of COVID-19 dominated the Spring meetings of the International Monetary Fund, with our emerging-market debt team among those following discussions closely.

Deciding when to tighten the purse strings and hike taxes is complex at any time, even more so when the economic fallout from COVID-19 remains unclear. Getting deficits under control will need to happen eventually, but it would be a brave government to pursue that goal in the short term.

Massive intervention by central banks and governments in recent years has left investors struggling to value financial assets.