“Foreign direct investment, portfolio flows, and other flows will be more than sufficient to cover emerging markets’ financing needs over the next 12 months. A positive net-supply of funds to emerging markets should also provide support for currency valuations,” according to a Babson Capital Management note posted by Dimitra DeFotis of Barron’s. “While recent commentary suggests the Fed will likely move to raise rates as soon as December 2015, and U.K. policymakers appear to be on a similar path, monetary policy on a global basis remains extraordinarily accommodative.”
While many may associate emerging markets with greater risks, investors should be comfortable with the relatively improved credit quality of emerging market issuers. According Bank of America Merrill Lynch, over 90% of emerging-markets sovereign debt was rated below investment-grade in 1998, but that number is now less than 40% as of March 2015, Ricardo Adrogué, head of emerging-markets debt, and Brigitte Posch, head of emerging-markets corporates, for Babson Capital Management wrote on InvestmentNews.
iShares J.P. Morgan USD Emerging Markets Bond ETF
Tom Lydon’s clients own shares of EMB.