As economies reopened in 2021, pent-up demand generated strong global growth. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities. Arjun Madan. Malaysia:PineBridgeInvestments MalaysiaSdnBhdis licensed and regulated by SecuritiesCommission of Malaysia (SC). To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Global Corporate Agg: Bloomberg Global Agg Corporate. The investment advisers products and/or services may not bepromoted or marketed in Colombia or to Colombian residents unless such promotion and marketingis made in compliance with decree 2555 of 2010 and other applicable rules and regulations relatedto the promotion of foreign financial and/or securities related products or services in Colombia. 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. 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. Source: IIF, IMF, Bloomberg; data as of September 2022. Hard-currency assets are less vulnerable to cyclical downturns, and high-yield spreads are relatively wide, with room for narrowing (Display). In Singapore, this material may not be suitable to a retail investor. This document is strictly private and confidential and is being issued to alimited number of professional investors: A) who meet the criteria of a Professional Client by Natureas defined in Article 2-6 of Module 8 of the Executive Regulations No. For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance. , . Opinions: Any opinions expressed in this document represent the views of the manager, are validonly as of the date indicated, and are subject to change without notice. A Brighter Outlook For Emerging Markets Debt. The asset class has low historical default rates over a 20-year time period: 1% annualized for the J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI-GD), which represents hard. Source: Bloomberg, J.P. Morgan Asset Management; data as of September 2022. Global Corporate Agg: Bloomberg Global Agg Corporate. We expect rising yields and tighter monetary policy in Europe to put further upward pressure on US yields. 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. By clicking the I Accept button, you agree to abide by the terms and conditions listed below. PineBridgeInvestments may, from time to time, show the efficacy of its strategies or communicate generalindustry views via modeling. Instead, developed markets are now growing much faster than before the pandemic, while EM economies continue to chug along at their pre-pandemic pace. This is not a public offering of securities in Mexico. 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. Corporates fared better as the credit quality of the index is higher than the sovereign index, notwithstanding specific sectorial problems (e.g. READ IMPORTANT LEGAL INFORMATION. Peru:Specifically, the Interests will not be subject to a public offering in Peru. PineBridgeInvestments is a registered trademark proprietary toPineBridgeInvestments IP Holding CompanyLimited. We have also entered a period of mild US exceptionalism, amid a recession in Europe and a slower-than- expected Chinese recovery. Diversified portfolio of EMD corporate bonds issued in major currencies. For emerging-market debt (EMD), 2022 is shaping up to be a contest of conflicting forces. Toda la informacin se refiere a la fecha indicada, salvo que se indique lo contrario. Core inflation may be stickier, due to the contribution from shelter and wages. Investors should note that by making an investment they will own shares in the fund, and not the underlying assets. Some emerging markets will have to weigh monetary adjustment (quantitative tightening) against fiscal restructuring. Against this backdrop, we think trade-weighted US dollar strength can continue in the near term. What does this climate mean for EM investors? Kirstie is based in London. 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. Singapore:PineBridgeInvestments Singapore Limited is licensed and regulated by the MonetaryAuthority of Singapore (MAS). Emerging markets have already seen decent outflows, Exhibit 5: Contribution to Global Growth Using Consensus GDP. Our analysis of US recessions since 1996 suggests that the EM-DM growth alpha could actually be most positive against a backdrop of global recession, which gives us some confidence in emerging market fundamentals. Fundamentals appear strong, with corporates well positioned to withstand headwinds, although technicals remain negative. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. The result has been a narrowing of the gap between EM and DM growth (Display). We estimate that EM countries have completed less than half of their tightening cycle so far, leaving the lions share for 2022. For now, hard-currency EMssovereign and corporate bonds alikehave more appeal than local-currency EMs. We are not soliciting or recommending any action basedon this material. 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). EM High Yield: J.P. Morgan Emerging Market Bond Index Global Diversified High Yield.US High Yield: Bloomberg US Corporate High Yield Index. Such methods are intended to show only an expected range of possibleinvestment outcomes, and should not be viewed as a guide to future performance. 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. Emerging Market Debt: A Wider Range of Opportunities, and Challenges, in 2021. 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. The securities are not andwill not be registered with the Central Bank of Uruguay to be publicly offered in Uruguay. Global growth is slowing (although growth remains abovetrend); parts of EM should see an acceleration in growth in 2022. Emerging Markets Debt Outlook. Case in point: the implications around Omicron remain unclear, but the size and duration of the market response suggests observers dont expect it to have a durable economic or market impact in 2022. The average debt-to-GDP ratio for EMs rose from 48 percent in 2019 to 60 percent in 2020. FAO: Food and Agriculture Organisation of the United Nations. Emerging Markets Have (Temporarily) Lost Their Growth Advantage, EM High-Yield Spreads Are Wide Compared to US High Yield. The bottom line? Copyright 2022 PineBridge Investments. Pre-pandemic, Chinas expansive growth drove commodity prices higher, which in turn helped drive growth in other commodity-rich countries. We expect financial conditions to continue to tighten in the near term, with quantitative tightening a contributing factor. Our base case expects economic weakness to be front loaded, while our inflation scenario is the most challenging, Exhibit 2: Simulated Return Analysis Based on Economic Scenarios. Slow vaccine rollouts across the emerging world are also challenging, and not only from the humanitarian perspective. This material is not reviewed or endorsed by the SC. Certaines donnes ayant t obtenues de tiers, leur fiabilit nest pas garantie. That level would be consistent with levels we saw in 2018, though insufficient for prior cycles. But China no longer sees itself as the worlds growth engine; instead, its broader policy framework prioritizes financial stability and the environment alongside growth. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Emerging market hard currency corporate credi. She holds a masters degree with honours in German and international relations from the University of St. Andrews, Scotland. 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. by Rashique Rahman of Invesco, 6/11/19. 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. 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. European Central Bank action has the potential to dent real US interest rates and cool the dollar. Outlook on Emerging Markets Outlook October 2022 Summary The stronger US dollar, higher inflation, and tighter financial conditions weighed on emerging markets equities in the third quarter. . 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. The credit impulse normally impacts economic activity with a nine month lag, as the chart below shows, suggesting that the Chinese economy will remain weak until the middle of next year. US Investment Grade: Bloomberg US Corporate Investment Grade Index. Time for Action. This creates a complex backdrop for EMFX more generally. For the whole of 2020, Eurobond issuance by emerging economy borrowers was some $800 billion, more than a 10 percent increase over 2019. The global Debt Consolidation market is expected to grow at a CAGR of 8% from 2022-2028. The size of the loan that Egypt will be getting from the IMF -- $3 billion -- came in at the lower end of expectations. EM High Yield: J.P. Morgan Emerging Market Bond Index Global Diversified High Yield.US High Yield: Bloomberg US Corporate High Yield Index. For all other markets in APAC, to intended recipients only. Sources: United Nations, Reuters/Refinitiv, Bloomberg, Capital Group calculations, Food makes up a higher proportion of CPI baskets in EM compared to DM countries, As at 31 December 2019. Current analysis does not guarantee future results. Hence, we begin the quarter in a defensive position but are beginning to turn more positive on duration in local rates, while continuing with a negative bias towards EMFX. Slow vaccine rollouts across the emerging world are also challenging, and not only from the humanitarian perspective. 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. 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. We think emerging market corporates are well positioned to handle currency weakness, though there are exceptions. This document and the information contained herein has been made available in accordance withthe restrictions and/or limitations implemented by any applicable laws and regulations. Any examples used are generic, hypothetical and for illustration purposes only. Alle Angaben beziehen sich nur auf den genannten Zeitpunkt (falls nicht anders angegeben). Taiwan:PineBridgeInvestments Management Taiwan Ltd. Is licensed and regulated by Securitiesand Futures Bureau of Taiwan (SFB). US labour markets remain extremely tight, with unemployment very low. For emerging-market debt (EMD), 2022 is shaping up to be a contest of conflicting forces. The CNBV has not reviewed or approval these offering materials. Emerging markets should continue to grow faster than advanced economies despite the global pandemic, according to Franklin Templeton Fixed Income's Nik Hardingham. Any referenced benchmark does notreflect fees and expenses associated with the active management of an investment. 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. Fixed Income. While we see rates anchored to support growth in the coming quarter, a gradual acceleration of inflation, along with a focus on targeted fiscal measures and a material rates differential with the US could all help to limit potential rallies. This document is provided on aconfidential basis for informational purposes only and may not be reproduced in any form. 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). 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. EM inflation elevated, but relatively contained. No. 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. Thisadvertisement or publication has not been reviewed by the MAS. Renta fija: la importancia de la flexibilidad, 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. We expect the renminbi to trend weaker. Emerging-Market Debt Outlook: Mixed Conditions in 2022. Basic balancesthe sum of current account balances and foreign direct investmentare as robust for EM countries as theyve been in 20 years. Source: J.P. Morgan Asset Management; data as of September 2022. Documents relating to the investment managementservices as well as the information contained therein may not be supplied to the public in Brazil. In contrast, we remain cautious on local-currency assets over the near term, as these tend to bear the brunt in a sell-off. 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. As of December 31, 2021 Risk Warning: All investments involve risk, including possible loss of principal. The European Central Banks (ECBs) reaction to inflation may also pull interest rate differentials to a more neutral level, potentially cooling the dollar (Exhibit 3). 2023 should see a growth improvement, with the October party congress a key catalyst. Germany:This material is issued byPineBridgeInvestments Deutschland GmbH, licensed andregulated by theBundesanstaltfrFinanzdienstleistungsaufsicht(BaFin). We see the probability of a US recession rising in the second half of 2023, which would likely mean a global recession, although we think the downturn might be mild and resemble 2001 rather than 2009. Performance Notes: Past performance is not indicative of future results. We see a positive technical position, with sentiment negative and positioning defensive. China would be expected to continue to favour new economy sectors and infrastructure with its policy response. The sovereign debt asset class delivered negative returns in 2021 - particularly local markets, which suffered from a double whammy of both currency depreciation and higher rates.
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