Looking ahead, emerging market fundamentals remain robust. Economic growth in the developing economies continue to be higher than developed markets, and the growth differential is expected to widen. Additionally, EM total debt as a percentage of GDP is much lower compared to the heavily indebted developed markets, and external debt to GDP is now lower than two decades ago.

“We believe the recent selloff may present opportunities for investors who can withstand the volatility in return for the portfolio diversification and yield potential the asset class provides,” Rodilosso added.

Bond ETF investors interested in gaining exposure to emerging market local currency bonds have a number of options to choose from. For instance, bond investors may look to something like VanEck Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) and VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG) to diversify their fixed-income portfolio with overseas opportunities and potentially higher yield generation.

EMLC is comprised of bonds issued by emerging market governments and denominated in the local currency of the issuer. EMAG holds a basket of sovereign bonds and corporate bonds denominated in local emerging market currencies, along with those denominated in U.S. dollars and euros, and the portfolio includes both investment-grade and below investment-grade debt.

For more information on the fixed-income markets, visit our bond ETFs category.

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