EM debt enters new phase

Eaton Vance emerging markets emerging market debt

12 August 2020
| By Oksana Patron |
image
image
expand image

After strong rebound in Q2, the market has entered a new phase and investors will see greater differentiation in performance across the emerging market debt (EMD) investment universe, according to Eaton Vance. 

Following this, investors should focus on three key areas which included: 

1.The critical role of country-level analysis; 

2. Investment flexibility, geographically and in terms of risk factors; and 

3. Balancing short-, medium- and long-term factors. 

Bradford Godfrey, institutional portfolio manager and director of alternative & asset allocation strategies at Eaton Vance, said that exploiting the full breadth of the EMD investment universe on a country and risk-factor basis, according to him, would remain a critical factor for investment success while investible risk factors would continue to include currencies, local interest rates and sovereign and corporate spreads. 

“We believe the market has entered a new phase following the broad-based recovery in the second quarter that will see greater differentiation in performance across the EM debt investment universe,” he said. 

“In our view, a focus on country analysis, investment flexibility and the ability to appropriately weigh shorter and longer-term factors will be critical for investment success in EM debt ahead. 

“While we see attractive relative value at the sector level in EM credit, we believe that selective opportunities remain in rates and currencies away from many of the large benchmark constituents.” 

According to Godfrey, Egypt was one country within the wider opportunity set which had good opportunity and expected positive growth in 2020, bucking the wider EM trend. 

“Other countries we’d highlight include Romania, Uzbekistan and Uruguay.  

“Although Romania faces an economic contraction, forecast at -5%, we believe relatively healthy debt metrics will help the country weather the current storm. Uzbekistan, for its part, is a country that’s not on many people’s radar. However, Uzbekistan’s growth forecast is positive, the budget deficit is manageable and its reform-minded leaders have been moving toward a more market-based system,” Godfrey noted. 

Similarly, Uruguay’s government was also implementing reforms, even in the midst of the pandemic.  

“While the growth outlook appears somewhat challenging, like other parts of the region, the country has taken steps to move forward a sustainable reform program,” the firm said

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Interesting. Would be good to know the details of the StrategyOne deal....

3 days 21 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 1 day ago

increased professionalism within the industry - shouldn't that say, FAR register almost halving in the last 24 months he...

4 weeks 1 day ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 3 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

2 days 19 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

1 day 22 hours ago