Emerging Market Debt Indicator December 2022

In addition to the investment team’s usual update on the EM debt universe, Nicolas Jaquier discusses developments in the fast-growing green, social, sustainable and sustainability-linked bond universe.

Jan 11, 2023

20 minutes

EMD Team

This edition includes:

  • Market background
  • Top-down views and outlook for the asset class
  • Focus article: Small but powerful: sustainability-linked bonds in emerging markets
  • Regional highlights and corporate credit market review
    Our EM debt experts summarise market developments across the sovereign debt universe in December and outline what’s taken place in the EM corporate credit market.

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The fast view

Market background

After the strong market returns in November, a more muted December marked a relatively steady end to a volatile year. In a boost to market sentiment, China’s authorities continued to relax COVID-related restrictions and provided extra support to the property sector. But a new wave of COVID cases underlined the uneven nature of China’s likely recovery path.


The IMF approved its programme in Egypt and the country’s central bank took concrete steps towards a more liberalised exchange rate. Separately, a 3.5 trillion cubic feet gas deposit was discovered off the coast of North Sinai. The IMF approved the disbursement of the next tranches of financing under Kenya’s upsized programme, complementing the government on its fiscal consolidation commitment.


Year-on-year inflation moderated for much of the region, with most central banks approaching the end of their rate-hiking cycles. Weak trade data reflected slowing global growth and lockdowns in China in November, but China’s relaxation of COVID restrictions in December was much faster and more substantial than expected, boosting sentiment.

Latin America

Brazil’s Congress watered down President Lula’s initially high fiscal spending plans, helping domestic assets. Political turmoil increased in Peru after now ex-President Castillo was impeached and imprisoned. Jamaica received funding from the IMF’s new resilience and sustainability facility (RSF) to help combat climate change. Ecuador successfully completed its IMF deal.

Central and Eastern Europe

Lower energy prices are helping regional producer prices (PPI) to fall, which should support a moderation in CPI inflation. Hungary’s rule of law dispute with the EU came to a head; it will have to implement further judicial reforms in Q1 2023 to receive disbursements. The Polish government has shown an increased openness to enact judicial reforms to unlock some EU fund disbursals of its own.

Rest of Europe, Middle East and Africa (EMEA)

The G7 implemented a price cap on Russian oil exports, which weighed on the ruble. To shore up his electoral base, Turkey’s President Erdogan hiked the minimum wage and reduced retirement restrictions. South Africa’s President Ramaphosa survived the intense pressure around corruption allegations and was re-elected as leader of the ANC.

EM corporate debt highlights

EM corporate debt held up well. The JP Morgan CEMBI gained 1.5% overall, with the positive effect of tightening credit spreads outweighing the negative impact of higher US Treasury yields. Top-performing markets included Argentina and Ukraine, which began to recover having traded at oversold levels for a long period of time. Bond issuers in China also performed well again, following the authorities' continued relaxation of restrictions and support measures for the property sector.

General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.

Specific risks. Emerging market: These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

Authored by

EMD Team

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This communication is provided for general information only should not be construed as advice.

All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

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