emerging markets debt outlook

PineBridgeInvestments is a group of international companies that provides investment advice andmarkets asset management products and services to clients around the world. But China no longer sees itself as the worlds growth engine; instead, its broader policy framework prioritizes financial stability and the environment alongside growth. Thorough research and. CLICK HERE>. Ratings and research on emerging markets debt providing views and analysis of corporates and sovereigns in developing markets in Asia, . Markets have entered a price discovery period as central banks exit accommodative monetary policies. More open economies appear more vulnerable to changing conditions for example, those in central and eastern Europe, and Mexico. China is revving up again as the world's growth engine, and the renewed emphasis on infrastructure in its Five-Year Plan and long-term strategy should benefit emerging markets through 2021 and perhaps beyond. Socit responsabilit limite, R.C.S. In contrast, we remain cautious on local-currency assets over the near term, as these tend to bear the brunt in a sell-off. Thesecurities correspond to investment funds that are not investment funds regulated by Uruguayanlaw 16,774 dated 27 September 1996, as amended. Netherlands:PineBridgeInvestment Ireland Limited, Netherlands Branch is licensed and regulatedbyThe Dutch Authority for the Financial Markets (AFM). CPI: consumer price index. Our inflation scenario, on the other hand, sees US 10-year yields reaching 4%. This document has not been reviewed by the SFC. Dubai:PineBridgeInvestments Europe Limited is regulated by the Dubai Financial Services Authorityas a Representative Office and is making this document available to you. Documents relating to this offering (as well as information contained herein) may not be supplied to the general public for purposes of a public offering in Argentina or be used in connection with any offer or subscription for sale to the public in Argentina. And selectivity is key. U.S. Outlook: Expect solid growth, stubborn inflation. This document and the information contained herein does not constitute and is not intended toconstitute an offer of securities or provision of financial advice and accordingly should not beconstrued as such. December 10, 2020. Accordingly, the Interests may not be offered orsold in Peru except, among others, if such offering is considered a private offer under the securitieslaws and regulations of Peru. Kirstie is based in London. This document is intendedfor sophisticated/professional investors only and no other Person should act upon it. For now, hard-currency EMssovereign and corporate bonds alikehave more appeal than local-currency EMs. Oops, the page you are looking for could not be found. (We agree.) Las perspectivas y opiniones manifestadas se basan en nuestras previsiones internas y no deben tomarse como una indicacin del comportamiento futuro del mercado. Should you like to request a different classification, pleasecontact yourPineBridgerepresentative. In Singapore, this material may not be suitable to a retail investor. Energy importers may enjoy some marginal relief next year, as commodities roll off their highs, although a decline in price does not help everyone equally. These securities are not under the supervision of the Superintendence of the Securities Market (before named National Securities Commission). Debt Consolidation Market report 2022 includes top countries data, detailed overview of current market, it . Sweden:PineBridgeInvestments Ireland Limited Sweden filial is licensed and regulated byFinansinspektionen. Whats more, central bank rate hikes will likely slow EM growth. Inflation has remained higher and more persistent in EM, compelling most EM central banks to begin tightening monetary policy. Esta informacin es facilitada por AllianceBernstein (Luxembourg) S. r.l. Hard-currency assets are less vulnerable to cyclical downturns, and high-yield spreads are relatively wide, with room for narrowing (Display). Our preference is to be long dollar, though we see selected relative value opportunities. Based on our soft landing scenario, we continue to favor EM local rates over hard currency credits as our preferred exposure. We estimate that EM countries have completed less than half of their tightening cycle so far, leaving the lions share for 2022. But with interest rates tanking across the world, even with the higher borrowing, debt servicing costs did not rise materially. Emerging markets have already seen decent outflows, Exhibit 5: Contribution to Global Growth Using Consensus GDP. However, compared with 2020, theres been a marked reduction in fear of unknowns. Investors should note that by making an investment they will own shares in the fund, and not the underlying assets. Only then will we improve well-being. Emerging market resilience: Not every country is the same. Die Aussagen einer bestimmten Person geben deren persnliche Einschtzung wieder. Time for Action. 2022 Midyear Emerging Markets Debt Outlook: Macro and Markets Featuring Markus Schomer, CFA Chief Economist Jonathan Davis Client Portfolio Manager, Emerging Markets Fixed Income We discuss our outlook for emerging markets vis--vis developed economies, including our expectations for global growth, inflation, and the risk of recession. 36 Tighter financial conditions in the United States and other advanced economies will pressure their own finances and currencies, which could exacerbate inflation and make servicing debt more challenging. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients use only, by local J.P. Morgan entities, as the case may be. Salvo diversamente indicato, tutte le informazioni si intendono alla data riportata. J.P. Morgan Asset Managements website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Continued monetary and fiscal stimulus, a recovery in developed economies and less aggressive geopolitics have the potential to create a virtuous cycle for EM debt. It bears repeating: In this environment, selectivity is paramount. Where applicable, the Manager may determine to terminate any arrangements made for marketingthe Shares in one or more jurisdictions in accordance with the AIFM Directive and UCITS Directiverespectively, as may be amended from time to time. Kuwait:The offering of any security in any vehicle has not been approved or licensed by the KuwaitCapital Markets Authority or any other relevant licensing authorities in the State of Kuwait, andaccordingly does not constitute a public offer in the State of Kuwait in accordance with Law no. Le presenti informazioni non intendono fornire consulenza fiscale, per gli investimenti o di altra natura, n essere una sollecitazione all'acquisto o alla vendita di titoli. Investors should closely monitor conditions and valuations and prepare to shift the portfolio mix as conditions warrant. Among the opportunities: Chinas long-term growth plan and less external vulnerability for EM countries. 330); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). Given our base case for moderating inflation and a soft landing, our assumptions suggest the JPMorgan GBI EM index could deliver returns of 16.4% on a 12-month forward basis, with hard currency sovereign returns (JPMorgan EMBIGD) of 13.3% over the same period (Exhibit 2). Investors should ensure that they obtain all available relevant information before making any investment. Investors will need to pinpoint pockets of resilience among the many macroeconomic challenges facing the asset class. Inflation remains elevated in emerging markets (EM) with ongoing but manageable risks. Basic balancesthe sum of current account balances and foreign direct investmentare as robust for EM countries as theyve been in 20 years. However, a recession scenario our bear case would see the US 10-year yield fall to 2.7%, from a third-quarter 2022 high of 3.38%. . The exemption from registration is based on numeral 3 of Article 129 of Decree Law 1 of July 8, 1999 (Institutional Investors), as amended. One concern has been the banking system, where profitability is being negatively impacted by a property market downturn. Current analysis does not guarantee future results. Against this backdrop, we think trade-weighted US dollar strength can continue in the near term. We are positioning our strategy for a coming US recession, though we remain mindful that inflation may be peaking. Emerging market corporates have generally exhibited good capex discipline, using cashflow to pay down debt. The managed account services may not be publicly offered or sold in Chile. Parte de la informacin puede haberse obtenido de terceros, por lo que no se garantiza su fiabilidad. Risk markets love a clear picture, but uncertainty isnt behind us. We are generally wary of high yield, with a focus on bottom-up stories. However, this sector may become more attractive later in 2022, once EM countries are further along in normalizing monetary policy and there is even more clarity around Fed tightening. Both past performance and yields are not a reliable indicator of current and future results. Strong fundamentals should provide resilience, should the expected economic recovery not unfold, although commodities especially metals and mining would be most exposed. We are not soliciting or recommending any action basedon this material. We prefer cheaper high yield to more expensive investment grade, which we believe will be negatively impacted by rising US Treasury yields. As economies reopened in 2021, pent-up demand generated strong global growth. The composition of their debt is another plus point. This strong demand is likely to fuel a commodities boom. Investors will need to pinpoint pockets of resilience among the many macroeconomic challenges facing the asset class. Melden Sie sich jetzt an, um branchenfhrende Einblicke und aktuelle Artikel in Ihrem Posteingang zu erhalten. We balance this view with tactical longs in the Brazilian real, Indonesian rupiah or Mexican peso. We expect more of the same for 2022. Uruguay:The sale of the securities qualifies as a private placement pursuant to section 2 ofUruguayan law 18.627. The securities and any other products or services referenced in this documentmay not be licensed in all jurisdictions, and unless otherwise indicated, no regulator or governmentauthority has reviewed this document or the merits of the products and services referenced herein. There can be no guarantee they will be met. This is not a public offering of securities in Mexico. For emerging-market debt (EMD), 2022 is shaping up to be a contest of conflicting forces. That level would be consistent with levels we saw in 2018, though insufficient for prior cycles. EM Corporates: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified High Grade. Panama:These fund interest(s) have not been and will not be registered with the Superintendence of the Securities Market of Panama (Superintendencia del Mercado de Valores de la Repblica de Panam). That. A recovery in tourism will also help some countries. The investment management services may not bepublicly offered or sold to the public in Brazil. Some emerging markets will have to weigh monetary adjustment (quantitative tightening) against fiscal restructuring. However, we see limited risk from the ongoing challenges in real estate and believe the system remains solvent and capable of normal operations. I rendimenti passati non sono indicativi di rendimenti futuri. EM High Yield: J.P. Morgan Emerging Market Bond Index Global Diversified High Yield.US High Yield: Bloomberg US Corporate High Yield Index. Emerging market hard currency sovereign credit. With median growth trending above 2019 levels, we expect emerging market debt and fiscal deficit levels to decline overall. New reality for investors: 5 big trends changing markets, Recession watch: triggers, outlook and what next for central banks. We have also entered a period of mild US exceptionalism, amid a recession in Europe and a slower-than- expected Chinese recovery. Pre-pandemic, Chinas expansive growth drove commodity prices higher, which in turn helped drive growth in other commodity-rich countries. Germany:This material is issued byPineBridgeInvestments Deutschland GmbH, licensed andregulated by theBundesanstaltfrFinanzdienstleistungsaufsicht(BaFin). The information contained in this document isreferential and may not be construed as an offer, invitation or recommendation, nor should be takenas a basis to take (or stop taking) any decision. Global growth is slowing (although growth remains abovetrend); parts of EM should see an acceleration in growth in 2022. Heading into 2022, EMD investors should consider leaning into hard-currency sovereign and corporate EM debt, be selective about where to take idiosyncratic risk, and carefully weigh how ESG factors will affect their investments. The materials relating to the fund interest(s) offering may not be distributed publicly in Mexico and the fund interest(s) may not be traded in Mexico. Among the obstacles in this asset class: a negligible difference in the GDP growth of developed markets (DM) and emerging markets (EM) excluding China; persistent inflation; populist pressures; and moderate near-term growth for China. ; in Canada, for institutional clients use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. Among the obstacles in this asset class: a negligible difference in the GDP growth of developed markets (DM) and emerging markets (EM) excluding China; persistent inflation; populist pressures; and moderate near-term growth for China. Esta informacin no pretende ofrecer asesoramiento en materia de inversin, fiscalidad o de otro tipo, ni ser una solicitud de compra o venta de valores. Several emerging countries share features such as a young demographic that make them particularly vulnerable to populist pressures, delayed fiscal consolidation and eroded democratic standards. Instead, developed markets are now growing much faster than before the pandemic, while EM economies continue to chug along at their pre-pandemic pace. We note that a 4% terminal rate would leave the real policy rate at 1.25%-1.5% by the end of 2023. Heading into 2022, EMD investors should consider leaning into hard-currency sovereign and corporate EM debt, be selective about where to take idiosyncratic risk, and carefully weigh how ESG factors will affect their investments. The IIF. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research. Thorough research and an active approach to investing is key to mitigating risk and finding opportunities in EM, no matter which way the wind blows. Les informations fournies dans le prsent document ne constituent pas une offre de conseil en investissement, en fiscalit ou autre, ni une sollicitation lachat ou la vente de titres. US labour markets remain extremely tight, with unemployment very low. Heres why. With this in mind, China has recently implemented both fiscal and credit measures to prevent a fiscal cliff in the coming quarter. In Asia Pacific (APAC), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. A significant proportion of the shock to EM inflation can be attributed to volatile food and energy prices. Rising Treasury yields and a stronger dollar. As of December 31, 2021 The path of the COVID-19 pandemic and the global macroeconomic environment are likely to be key drivers of returns for emerging markets (EM) debt in 2021, as they were in 2020. That said, we think the worst of the cycles sovereign defaults are now behind us, with International Monetary Fund programmes more sufficient than necessary. Investors will need to pinpoint pockets of resilience among the many macroeconomic challenges facing the asset class. Alle Angaben beziehen sich nur auf den genannten Zeitpunkt (falls nicht anders angegeben). The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Source: Bloomberg, J.P. Morgan Asset Management; data as of September 2022. The value of investments may go down as well as up and investors may not get back the full amount invested. Emerging Market Debt: A Wider Range of Opportunities, and Challenges, in 2021. At any rate, China may no longer need to be the linchpin at the heart of a commodities surge. The market has reversed since its dive in March, when emerging market (EM) hard currency spreads widened to over 700 basis points over Treasuries and now tightened to below 600 bps. On the economic front, a very strong recovery is anticipated, with the International Monetary Fund (IMF) forecasting emerging market growth of +6% from an estimated contraction of -3.3% in 2020. Current analysis does not guarantee future results. EM inflation elevated, but relatively contained. Investors will need to pinpoint pockets of resilience among the many macroeconomic challenges facing the asset class. Meanwhile, EM countries external vulnerability has declined. China: Improving growth but lingering tensions. This information may not be construed as servicesprovided byPineBridgeInvestments within Peru without having the corresponding banking or similarlicense according to the applicable regulation. While emerging markets have been broadly resilient to successive shocks, some remain more vulnerable than others. By comparison, we see Chinese growth accelerating in 2023. Thisadvertisement or publication has not been reviewed by the MAS. Nothing herein constitutes an offer or solicitation to anyone in or outsideAustralia where such offer or solicitation is notauthorisedor to whom it is unlawful. As a result, wage growth continues to increase. Taiwan:PineBridgeInvestments Management Taiwan Ltd. Is licensed and regulated by Securitiesand Futures Bureau of Taiwan (SFB). Investors and potential investors can obtain a summary of investor rights and information on accessto collective redress mechanisms atwww.pinebridge.com/investorrights. Il valore degli investimenti e del relativo reddito pu aumentare come diminuire e linvestitore potrebbe perdere in parte o per intero limporto dellinvestimento iniziale. Key Findings from the Fitch Ratings-FinanceAsia 2020 Asia Credit Market Outlook survey. In consequence, the tax treatment established in Articles 334 to 336 of Decree Law 1 of July 8, 1999, as amended, does not apply to them. In Japan, this document is directedat and intended for qualified institutional investors (as such term is defined in Article 2, paragraph 3,item 1 of the FIEA; QIIs). All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Can non-U.S. equities overcome a strong U.S. dollar? The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. Emerging Market Debt Philosophy BlackRock's Emerging Market Debt (EMD) platform is designed to address the changing landscape of today's EMD markets with a focus on alpha generation. La valeur des investissements et le revenu quils gnrent ne sont pas constants dans le temps, et les investisseurs ne sont pas assurs de rcuprer lintgralit de leur mise initiale. And our research shows that about two-thirds of EM corporate bonds that underperformed over the past 10 years did so specifically because of ESG reasons, from catastrophic environmental events to accounting fraud. Emerging-Market Debt Outlook 2022 Home Discretionary SEND Emerging-market debt face three main challenges in 2022: a reduction in the provision of global liquidity, lower structural growth and contribution to global demand from China, and unsustainable debt levels for some of the more indebted economies. Finally, Chinas growth has slowed, removing a historical tailwind for other EM countries. On a year-to-date basis, hard-currency emerging market debt has returned -18.78%, while local-currency emerging market debt has returned -14.40%. Scenarios reflect simulations based on assumptions, not forecasts. A recession scenario would deliver milder results, with both hard and local currency assets returning around 7% according to our simulations (all returns in US dollar terms). China makes our list twice, as both an obstacle and an opportunity. We note that ratings have stabilised, with 82% of our issuers on stable or positive outlooks. Thats one reason we believe that evaluation of environmental, social and governance (ESG) considerations should be an integral part of the investing process, for both sovereign and corporate EM issuers. Source: Bloomberg, J.P. Morgan and AllianceBernstein (AB). El valor de las inversiones y los ingresos derivados de las mismas pueden bajar o subir y usted puede perder una parte o la totalidad de su inversin inicial. Fixed Income. As of December 31, 2021 Local rates: We conclude that we have reached a pivot on receivers, where we recommend hedging potential volatility with developed market rates while waiting for confirmation. Abonnez-vous ds maintenant pour recevoir des informations davant-garde et des articles dactualit, directement dans votre bote de rception. European Central Bank action has the potential to dent real US interest rates and cool the dollar. No. Beforeacting on any information in this document, prospective investors should inform themselves of andobserve all applicable laws, rules and regulations of any relevant jurisdictions and obtainindependent advice if required. But China no longer sees itself as the worlds growth engine; instead, its broader policy framework prioritizes financial stability and the environment alongside growth. Investors should therefore incorporate ESG factors into the analysis, even if responsible investing isnt top of mind. Sign up now to get industry-leading insights and timely articles delivered to your inbox. Emerging markets have already seen decent portfolio outflows (Exhibit 6), suggesting a degree of tightening has been priced in, while most emerging markets are now looking for inflation to roll over. Support from central banks during Q2 helped to buoy asset prices across many different markets, including EM debt. In recent months, investors have been demanding higher returns on bonds . 4 m. In these times of uncertainty and more expensive funding, a pragmatic approach requires cooperation and focus on what really matters. This is a branch office ofPineBridgeInvestments Ireland Limited, licensed and regulated by the Central Bank of Ireland. Data from the Institute of International Finance (IIF) showed that small inflows into emerging market debt for the year until end-May were almost all offset by outflows from equities. The bottom line? Further, an additional IMF facility in 2022 that transfers the benefits of SDRs from rich countries to developing nations would also strengthen EM liquidity. Thorough research and an active approach to investing is key to mitigating risk and finding opportunities in EM, no matter which way the wind blows. PineBridgeInvestments often uses benchmarks for thepurpose of comparison of results. Colombian residents acknowledge and representthat(1)the receipt of thispresentation does not constitute a solicitation fromthe investment adviser for its financialproducts and/or services, and (2) they are not receiving from the investment adviser any direct orindirect promotion or marketing of financial products and/or services. Egypt's Post-IMF Pain Is Lesson for Debt-Laden Emerging Markets. In the UK, this material may also be issued byPineBridgeBenson Elliot LLP, registered in England(company number OC317119) with its registered address at 50 Hans Crescent, London, SW1X 0NA. We use selection to avoid weaker balance sheet and illiquid bonds. Promocin y oferta de los negocios y servicios de la entidad del mercado de valores del exterior [ofinanciera, segn sea el caso] representada en Colombia. We expect to see the renminbi weaken against the dollar in the coming quarter, with the currency moving more gradually within the China Foreign Exchange Trade System (CFETS) basket. a huge increase in demand for copper, aluminum, cobalt and lithium, incorporate ESG factors into the analysis, Emerging-Market Debt Outlook: Mixed Conditions in 2022. READ IMPORTANT LEGAL INFORMATION. Fiscal and external balances are at manageable levels. While credit ratings have reflected these improving fundamentals, with several upward revisions in the most recent quarter, we expect credit rating adjustments to become more balanced. Quantitative tightening remains in play and will become more relevant when we reach terminal rates. A US$650 billion increase in the International Monetary Funds (IMF) Special Drawing Rights (SDR) to help countries deal with the ongoing impact of the pandemic has also improved EM external positioning. Clean hydrogen: Opportunities beyond the hype, Navigating dark clouds across emerging markets debt, Unearthing opportunities in Asian credit markets, Our approach to integrating Environmental, Social and Governance issues in investing. When buying a home, a lower mortgage rate means we can afford to buy more home for the same monthly payment. Peru:Specifically, the Interests will not be subject to a public offering in Peru. Goldman Sachs Group Inc. and Bank of America Corp. had . Further, an additional IMF facility in 2022 that transfers the benefits of SDRs from rich countries to developing nations would also strengthen EM liquidity. Colombia:This document does not have the purpose or the effect of initiating, directly or indirectly,the purchase of a product or the rendering of a service byPineBridgeInvestments ("investmentadviser") to Colombian residents. A significant proportion of the shock to EM inflation can be attributed to volatile food and energy prices. 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