Market background
It was a weaker month for EM fixed income and currency markets. Rising inflation pushed up US Treasury yields before they reversed course after news broke of the Omicron COVID variant, with similar sharp shifts happening across financial markets.
Africa
Egypt responded to concerns over further dollar bond issuance by securing external funding, including US$3 billion in bank loans to fund ESG projects. In Kenya, tourism has been slowly improving, remittances are at record levels, and the economy has rebounded strongly as lockdowns have eased.
Asia
Most of the region continues to embrace a ‘living with the virus’ approach to COVID-19, but China, Hong Kong and Taiwan continue to adopt a zero-tolerance approach. Inflation has risen slightly in the region but remains relatively benign. High vaccination rates have lifted Singapore’s growth outlook.
Latin America
Central banks in the region continue to react to inflation, but it may be close to peaking in some countries. Investors welcomed election results in Chile and Argentina, but the appointment of a relatively unknown candidate as central bank governor in Mexico weighed on sentiment.
Central and Eastern Europe
Poland, Hungary and the Czech Republic all aggressively hiked interest rates during the month. Poland’s national bank surprised the market with a bigger-than-expected rate rise, leading to a sell-off in the country’s local currency bonds.
Rest of Europe, Middle East and Africa (EMEA)
The Turkish central bank announced a further interest rate cut, causing the lira to sell off. Elsewhere, tensions between Russia and neighbouring Ukraine intensified during the month, and Omicron variant news weighed on South African assets.
Specific risks
Emerging market: 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.
General risks
The value of investments, and any income generated from them, can fall as well as rise. Costs and charges will reduce the current and future value of investments. 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.