A hard look at hard currency

We examine the need for structural allocations in emerging markets for both hard currency sovereign and corporate debt.

27 Nov 2020

5 minutes

Victoria Harling
Thys Louw

The fast view

  • Increasingly, investors are accepting the need for structural allocations in emerging markets (EM) for both sovereign and corporate debt
  • EM hard currency offers a pick-up in yield and spread over developed market (DM) credit, often accompanied by superior fundamentals
  • Structural changes in EM hard currency sovereigns include an expansion of the frontier universe and Middle East issuers, and lower levels of non-local currency debt
  • For EM corporates, growth in Asia and China has led to a more diversified asset base
  • Elevated spread premia compared to pre-COVID levels suggests opportunities in both asset classes


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EM Debt in Discussion – session 5

A hard look at hard currency

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.

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.


Authored by

Victoria Harling
Portfolio Manager
Thys Louw
Portfolio Manager

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