Emerging perspectives

Emerging Market Debt Indicator March 2022

Summarising the latest market developments across the EM debt universe – including a focus on the crisis in Sri Lanka – and the investment team’s views on the outlook for the asset class.

Apr 7, 2022

24 minutes

EMD Team
Summarising the latest market developments across the EM debt universe – including a focus on the crisis in Sri Lanka – and the investment team’s views on the outlook for the asset class.

This edition includes:

  • Market background
  • Top-down views and outlook for the asset class
  • Focus article: Mark Evans reflects on his recent trip to Sri Lanka
  • Regional highlights and corporate credit market review
    Our EM debt experts summarise market developments across the sovereign debt universe in March and outline what’s taken place in the EM corporate credit market.

Download the PDF

The fast view

Market background
It was a volatile month given a combination of ongoing uncertainty around the war in Ukraine and expectations of tighter monetary policy. Hawkish rhetoric from the US Federal Reserve as it hiked rates led to a sell-off in US Treasuries, with a similar theme seen in other markets.

Egypt’s policymakers took steps to mitigate the impact of rising wheat prices and the central bank allowed the currency to move 10% higher, hiked rates and announced it intends to move onto a new IMF programme. Political noise continued in Tunisia but progress towards an IMF program continues.

Ongoing strength in commodity prices is having a divergent impact on economies across the region and differences in monetary policy direction reflect this, with India, Thailand and Indonesia seeking to support growth and Taiwan and Singapore looking to contain inflation. Omicron continues to spread, with China’s zero-tolerance response contrasting with South Korea, Singapore, Thailand and Malaysia.

Latin America
Currencies in the region continued to outperform but the sell-off in global rates impacted some markets. Rate hiking continued but central banks in Chile and Brazil signalled that they are nearing the end of their hiking cycle. Argentina’s IMF deal passed in congress and was approved by the IMF board, resulting in the first disbursement of almost US$10 billion.

Central and Eastern Europe
Inflation continues to rise and central banks reacted with further rate hikes. The Polish government announced it will stop importing Russian oil and gas by the end of 2022 and will stop importing Russian coal by May at the latest.

Rest of Europe, Middle East and Africa (EMEA)
Economies with close ties to Russia saw their currencies weaken. The continued strength in oil prices remains supportive for oil-exporting economies in the Gulf region. This is likely to reduce the need for bond issuance this year.

EM corporate debt highlights
The market remained under pressure in March, exacerbated by the effect of Russian bonds leaving the index at a price of zero. Geopolitical developments were the main drivers of spread returns, with the spill-over effect from the Russia/Ukraine war weighing on broader risk appetite. That said, overall market moves were dominated by the underlying rates returns component. Continued liquidity pressure and renewed COVID lockdowns impacted the Chinese real estate sector; it will take time for the positive shift in policy support to be reflected in asset pricing.

Authored by

EMD Team

Important Information

The information may discuss general market activity or industry trends and is not intended to be relied upon as a forecast, research or investment advice. The economic and market views presented herein reflect Ninety One’s judgment as at the date shown and are subject to change without notice. There is no guarantee that views and opinions expressed will be correct and may not reflect those of Ninety One as a whole, different views may be expressed based on different investment objectives. Although we believe any information obtained from external sources to be reliable, we have not independently verified it, and we cannot guarantee its accuracy or completeness. Ninety One’s internal data may not be audited. Ninety One does not provide legal or tax advice. Prospective investors should consult their tax advisors before making tax-related investment decisions.

This communication is provided for general information only and is not an invitation to make an investment nor does it constitute an offer for sale. Investment involves risks. This is not a recommendation to buy, sell or hold a particular security. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. The securities or investment products mentioned in this document may not have been registered in any jurisdiction.

In Hong Kong, this communication is issued by Ninety One Hong Kong Limited and has not been reviewed by the Securities and Futures Commission (SFC).

Except as otherwise authorised, this information may not be shown, copied, transmitted, or otherwise given to any third party without Ninety One’s prior written consent. © 2022 Ninety One. All rights reserved.

Past performance figures shown are not indicative of future performance. Investors are reminded that investment involves risk. Investors should refer to the offering documents for details, including risk factors. This website has not been reviewed by the SFC. 

By clicking on the hyperlink of Investor relations below, you are leaving this website with information specific for retail investors in Hong Kong and entering the global website.

Please note that the global website is not intended to target Hong Kong investors. It has not been reviewed by the Hong Kong Securities and Futures Commission (“SFC”). The website may contain information on funds and other investments products that are not authorised by the SFC and therefore are not available to retail investors in Hong Kong. The website may also contain information on investment services / strategies that are purported to be carried out by a Ninety One group company outside of Hong Kong.

Any product documents and information contained in this website are for reference only and for those persons or entities in any jurisdictions or country where the information and use thereof is not contrary to local law or regulation.

Issuer: Ninety One Hong Kong Limited
Email: [email protected] 
Telephone: (852) 2861 6888 
Fax: (852) 2861 6861