EM Local Currency Investing
Also Interesting
Investor risk appetite brings new players to an expanding opportunity set
Emerging market debt has seen record inflows across 2016 and 2017 as income-seeking investors seek out higher returns in reaction to the bleak yield landscape across much of the developed market (DM) universe. Local-currency denominated assets did particularly well in this context, with the JPMorgan GBI-EM Global Diversified index returning over 20% from February 2016 to October 2017. This relatively new asset class is rapidly expanding from a base of some 17 markets, presenting, in our view, a number of interesting developments for investors from both a return and diversification perspective. Holding restrictions around China’s local bond market were eased in 2016 with the launch of the China Interbank Bond Market scheme (CIBM). BlueBay is at the forefront of CIBM developments, being one of only four investment institutions worldwide to be granted a license to access the market to-date. At an excess of US$ 7 trillion in size, and with foreign investors currently holding only 2% of this, the opportunity set appears abundant to us.
