We remain highly constructive on emerging markets in 2018, with local debt expected to continue to outperform hard currency debt in the year ahead. Local debt is starting the year with a much higher carry (over 6%) and EM FX should benefit from a number of interest rate hikes, specifically in the low-yielding segment of the asset class. High yielding currencies, on the other hand, will generally continue to benefit from stronger commodities prices, a by-product of the synchronised global growth cycle.
In contrast, we expect that external debt could be negatively impacted by Fed hikes. If we add up the carry, plus a modest currency appreciation, EM local debt performance for 2018 could be close to 10%. READ MORE
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