After a market sell-off in 2018, we believe that emerging market (EM) fixed income should perform better in 2019, thanks to sound fundamentals, reduced political risk and more favourable technicals and valuations.
Key Points
1) 2018 was a volatile year for EM fixed income, due to a combination of negative global and idiosyncratic factors. Still, the relative performance of the different EMFI sub-asset classes was in line with their longerterm risk-adjusted trends.
2) The outlook for 2019 is more positive as EM and developed market growth should remain solid, EM political risk is easing, and commodities should rebound from their recent lows.
3) Market technicals and valuations also appear supportive.
4) Our EM fixed income strategies are cautiously positioned as we enter into the year end, but we are looking to gradually increase our market exposure to take advantage of this more positive outlook.
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