Emerging Market Bonds: A Contrarian Investment

Emerging market debt has suffered following the Trump election with prices falling and yields rising. This provides a contrarian opportunity says Morningstar Investment Management

Dan Kemp 29 December, 2016 | 10:00AM
Facebook Twitter LinkedIn

One area of the fixed income market we still see fundamental appeal is emerging market debt. This asset class has suffered following the Trump election with prices falling and yields rising. This provides us with a contrarian opportunity, as investors suffer from an abundance of misunderstandings and misconceptions.

For example, most people immediately think of structural risks in China and the impact it would have on emerging market growth. However, what most investors do not realise is that emerging market debt has very little exposure to China. For example, the most common local currency benchmark  contains an insignificant exposure to China of just 4%, even in hard currency terms, China is still constrained to approximately 4% of the major index.

A Day in the Life of a Volatile Asset

This is not to say that sentiment towards emerging market debt won’t be impacted by China. To gain a better understanding of emerging market debt and its volatility, a simple take on the “day in the life” can be described below:

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement