Emerging Market Debt Indicator December 2024

Our EM Debt team provides an update across the investment universe and shares the latest outlook and current top-down positioning.

Jan 16, 2025

14 minutes

EMD Team

Chapters

01
Market background
02
Top-down views and outlook
03
Africa
04
Asia
05
Latin America
06
Central and Eastern Europe, Middle East and South Africa
07
EM corporate highlights
01

Market background

Close-up of dark green leaves
The combination of rising bond yields in developed markets and ongoing US dollar strength weighed on EM fixed income markets. Strong performance by some high-yield hard currency debt markets stood out in an otherwise subdued end to the year.

It was a challenging end to the year for EM fixed income, as developed market bond yields rose, particularly in the US. US Treasury yields resumed their rise given signs of sticky inflation and hawkish forecasts from the US Federal Reserve (Fed) – with the Fed’s ‘dot plots’ pointing to just two rate cuts in 2025, down from four in its previous meeting. The US dollar continued its recent strong run against a global basket of currencies, helped by the Fed’s hawkish stance.

Against this backdrop, EM fixed income and currencies struggled, with the local currency debt market (JP Morgan GBI-EM GD) down 1.9% overall, driven by EM FX (-1.5%), with rates returning -0.4%. EM FX was weighed down by the continued US dollar strength, with some Latin American currencies under notable pressure. In the hard currency space, the sovereign market (JP Morgan EMBI GD) fell 1.4%, driven by investment-grade markets which are more sensitive to the moves in US Treasury yields. The high-yield area of the hard currency market fell by a more modest 0.6%, with strong performance by Lebanon, Argentina and Ukraine lifting the overall index.

General risks. The value of investments, and any income generated from them, can fall as well as rise. Where charges are taken from capital, this may constrain future growth. Past performance is not a reliable indicator of future results. If any currency differs from the investor's home currency, returns may increase or decrease as a result of currency fluctuations. Investment objectives and performance targets are subject to change and may not necessarily be achieved, losses may be made. 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 (inc. China): 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

Important Information

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.

All rights reserved. Issued by Ninety One.

Investment Process
Any description or information regarding investment process is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular Strategy. Portfolio data is expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective.