Emerging Market Debt Indicator August 2022

Portfolio Manager Grant Webster addresses some of the key questions EM Debt investors asked him on his recent roadshow. The wider team also highlights the latest developments across the investment universe.

12 Sept 2022

21 minutes

EMD Team

This edition includes:

  • Market background
  • Top-down views and outlook for the asset class
  • Focus article: EM Debt Q&A: Exploring a more constructive outlook
  • Regional highlights and corporate credit market review
    Our EM debt experts summarise market developments across the sovereign debt universe in August and outline what’s taken place in the EM corporate credit market.


Download PDF

The fast view

Market background

Government bond yields across developed markets rose in August, as policymakers turned more hawkish to battle persistent inflationary pressures. This was particularly pronounced in Europe, where gas prices have continued to spiral upwards, adding to already high cost of living pressures.

Africa

Ghana finally approached the IMF for a US$3 billion deal, while in Zambia, the IMF approved a US$1.3 billion financing program. In a positive sign for Kenya’s democratic process, the Supreme Court upheld the result of the presidential election, with a victory for William Ruto.

Asia

There was a clear divergence between the tech-exporting north and the services-driven south-east region, with trade data disappointing across South Korea, Singapore and Taiwan. Data in China was weak across the board and increased COVID cases led to more lockdowns.

Latin America

Central banks in Brazil and Colombia hiked interest rates, with inflation in the former appearing to reach a peak over August. Inflation surprised on the upside in Chile and Peru, while Q2 GDP data in Mexico was slightly better than expected.

Central and Eastern Europe

Inflationary pressures broadly persisted across the region and governments are taking steps to contain energy price increases. The Czech National Bank kept interest rates on hold, in contrast to Hungary’s central bank, which raised rates as inflation dynamics are poor.

Rest of Europe, Middle East and Africa (EMEA)

Russia continued to restrict gas supplies to the EU. Ukraine successfully negotiated a freeze on external debt repayments, which bond holders approved. Growth data in South Africa remains weak. In the Middle East, the weaker oil price put more pressure on OPEC to amend production plans.

EM corporate debt highlights

EM Corporate debt (JP Morgan CEMBI BD) produced a marginally positive return in August, despite the significant continued sell-off in Treasuries, materially outperforming both the US investment-grade and high-yield markets. Positive returns in EM were driven by spread tightening, with the high-yield segment of the market outperforming investment grade.

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.

This communication may include hyperlinks which lead to websites published or operated by third parties. Providing the hyperlink does not imply any affiliation, sponsorship, endorsement, approval, verification or monitoring of any information contained in the third party websites. Ninety One has not reviewed any third party websites for accuracy or completeness and is not in any way responsible for the content of any third party websites. Using or following the hyperlinks is at your own risk.

In Singapore, this communication is issued by Ninety One Singapore Pte Limited (company registration number: 201220398M) and has not been reviewed by the Monetary Authority of Singapore.

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. © 2023 Ninety One. All rights reserved.

Past performance shown are not indicative of future performance. Investors are reminded that investment involves risk. Investors should read the prospectus and product highlights sheets of the funds which are available from ninetyone.com/en/singapore or any of the appointed distributors before making any investment decision. Please contact your financial advisor if you are in doubt of any information contained in this website. The value of the shares in the fund and the income accruing to the units, if any, may fall or rise.

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

Please note that the global website is not intended to target investors in Singapore. It has not been reviewed by the Monetary Authority of Singapore (“MAS”). The website may contain information on funds and other investments products that are not authorised or recognised by the MAS and therefore are not available to retail investors in Singapore. The prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of these funds and/or other investment products may not be circulated or distributed, nor may such shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore. The website may also contain information on investment services / strategies that are purported to be carried out by an Ninety One group company outside of Singapore.

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.

This website has not been reviewed by the Monetary Authority of Singapore. Issued by Ninety One Singapore Pte Limited (Co. Reg. No. 201220398M).