As bond investors, we care principally about generating attractive levels of income per unit of risk. In our opinion, market sentiment for many EM economies continues to heavily discount the emerging market story. China may slow, South Africa may be facing a period of social unrest, and India may continue to be mired in short-term setbacks, but all three of these economies have overwhelmingly positive growth trajectories. We could just as easily highlight the two credit ratings upgrades in the Philippines (and one for Turkey) that now create yields in excess of the U.S. high yield market in a much higher credit-quality portfolio5.
Ultimately, emerging markets will undoubtedly continue to be met with challenges and volatility. But should investors continue to believe in their long-term trajectories, some assets may prove to be attractive long-term buying opportunities once market sentiment begins to turn.
Rick Harper is head of fixed income and currency for WisdomTree Asset Management. This post was republished with permission from the WisdomTree blog.
1Source: Bloomberg, 2013.
2As represented by the Ryan Labs 10 Year Bond Index, Bloomberg.
3As represented by the J.P. Morgan GBI-EM Global Diversified Index.
4Sources: JPMorgan, Bloomberg, 2013.
5Source: WisdomTree, 7/31/2013.