Fixed-income exchange traded fund investors who are looking for some value in the bond market may want to take a look at emerging market debt.
BlackRock analysts argue that bond valuations already reflect low commodity prices and global central banks’ dovish stance makes riskier assets more attractive, The Malay Mail Online reports.
“It is premature to say that the weather has totally cleared” for emerging-market bonds, according to BlackRock. “But with many of the market ‘negatives’ accounted for, it is time to concentrate on some of the ‘positives,’ which we see gaining strength as market drivers going forward.”
Franklin Templeton’s chief investment officer for global macro Michael Hasenstab argues that the negative outlook on developing markets has gone too far, comparing the pessimistic sentiment now toward emerging markets to the time during the global financial crisis, which proved to be a buying opportunity.
“There is a deceleration, there is a moderation, there is not a collapse,” Hasenstab said. “But the markets are pricing in a collapse. So this to us is a fantastic opportunity when you have a huge disconnect between reality and market prices.”
Goldman Sachs’s emerging-market bond manager Yacov Arnopolin also sees the developing markets bottoming out this year
“We don’t anticipate a rapid rebound or V-shaped recovery,” Arnopolin said in a note. “Rather, we see EM turning the corner after three straight years of declining valuations and downward growth projections.”