Emerging perspectives

Emerging Market Debt Indicator May 2021

Our hard currency debt managers examine the world of frontier markets and reveal their increasing importance for investors today. We also highlight recent regional developments and provide an updated outlook across the EM debt universe.

7 Jun 2021

22 minutes

Our hard currency debt managers examine the world of frontier markets and reveal their increasing importance for investors today. We also highlight recent regional developments and provide an updated outlook across the EM debt universe.

This edition includes:

  • Market background
  • Top-down views and outlook
  • Insights from the team
    • The frontier market misnomer: Managers of our hard currency EM debt strategy, Werner Gey van Pittius and Thys Louw, discuss the world of frontier markets and reveal their increasing importance for EM debt investors today.
  • Regional highlights
    • Our EM Fixed Income team summarises May’s market developments across the EM sovereign debt universe.

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The fast view

Market Background

  • The JP Morgan GBI-EM Global Diversified Unhedged Index produced a total return of 2.5% in US dollar terms, while the JP Morgan EM Bond Index returned 1.1%.
  • Investors were more cautious in response to a sharp rise in US inflation data during the month.


  • PMI’s across the region ticked higher, with Zambia’s PMI moving into expansionary territory for the first time in two years.
  • Inflation fell across many of the region’s markets, with Egypt’s inflation dropping to 4.1% in April on the back of falling food prices.


  • The slow pace of vaccine rollouts meant even relatively small increases in COVID cases prompted lockdowns in the region which weighed on domestic demand.
  • However, external dynamics remain robust, and the reopening of the global economy is giving a significant boost to the region’s exports.

Latin America

  • The region’s COVID vaccination drive shifted up a gear with solid progress being made in Chile and Uruguay, although the latter is in the midst of a severe second wave.
  • Political uncertainty and protests remained a feature in some countries. In contrast, highlights included Argentina (positive dynamics re. repayment agreements with the Paris Club) and Mexico (benefiting from US fiscal stimulus and strong remittances).


  • The region’s COVID situation is much improved thanks to relatively tough lockdowns and a pick-up in the rate of vaccinations, allowing economies to reopen.
  • An intensification of inflationary pressures, partly due to a strong rebound in economic activity, prompted several of the region’s central banks to shift to a more hawkish stance.

Rest of EMEA

  • Russian assets benefited from improving geopolitical news flow as the country’s foreign minister met the US Secretary of State, with both committing to a normalisation of relations.
  • In Turkey the central bank continues to try to appear prudent and dispel concerns that it will cut rates too quickly, but the sacking of a deputy governor underscores risks around monetary policy, as did the early June comments from Erdogan on the need for rate cuts.


Authored by

EMD Team

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