According to Sabrina Jacobs, Senior Client Portfolio Manager at Pictet Asset Management:

“Professional investors joke that the UK is turning into an emerging market. This is a disservice to actual EM economies. In fact, in some respects less developed countries are proving a relative haven of stability – not least in the corporate bond market”

“EM corporate borrowers are less vulnerable to capital flight than in the past due to greater local investor ownership of their bonds, have relatively low leverage and are by and large based in countries with robust macro-economic fundamentals. And at a time of general bond market volatility, yields on short duration EM corporate credit look particularly attractive.”

“However, there is plenty of variation between regions and sectors, so investors need to be diligent. Currently we like highly rated Chinese tech companies – they have maintained strong margins with their retail customer base and inflation is considerably lower in China than anywhere else. We are also bullish on the domestic banking sector in countries like Indonesia, the Philippines and India, where balance sheets have been built up in the wake of Covid and are therefore able to extend credit actively again.”