Still, it could take more than just a week of inflows to convince all market observers that the time is right to reconsider developing world debt. Earlier this week, the Asian Development Bank expressed concern that easy access to credit is becoming more restricted and “the impact of higher interest rates on the economy may be intensifying” for countries in Emerging East Asia, a region that includes Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam. [This Region Could be Problematic for EM Bond ETFs]
Others contend the outlook for Asian corporate bond issuance remains robust and that could benefit select ETFs.
“We see three main reasons for the dramatic growth in issuance – and, critically, despite recent market volatility, we expect all three to remain in force over the secular horizon. First, there is a lack of U.S.-dollar-denominated sovereign supply as countries develop, mature and increasingly prefer to issue debt in their own currencies. Second, we expect continued strong demand for spread product as net issuance globally remains at fractions of pre-crisis levels. Finally, post-crisis deleveraging within the banking sector has companies looking outside their traditional banking relationships for financing – and to satisfy their growing appetite for mergers and acquisitions overseas,” said PIMCO, the world’s largest bond manager, in a research note.
Improved sentiment toward emerging markets bonds, in particular corporates and quasi-sovereigns, should benefit an ETF like the WisdomTree Emerging Markets Corporate Bond Fund (NasdaqGS: EMCB). EMCB allocates almost 14% of its weight to Asian issuers.
WisdomTree Emerging Markets Corporate Bond Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EMB.