“After the recent setbacks, the tendencies macroeconomic and structural are finally moving in favor of Local currency bonds emerging markets (EM). In the face of the global financial crisis triggered by the turbulent first hundred days of mandate of President Donald Trump, the long -term perspectives for this asset class have improved constantly “. This is what they claim Alper GocerHead of Emerging Markets Fixed Income of Pictet asset managementAnd Adriana CristeaSenior Investment Manager.
The analysis highlighted that among the Factors in support of the Asset Class there are the Vfavorable raises, high carry, monetary policy In loosening and the growing probability of a US dollar decline in the long term.
The dollar factor
It seems that at the moment different trends are moving definitely in favor of emerging debt in local currency, analysts underlined. “Let’s take the US dollar: his undisputed race of recent years, supported by US exceptionalism, has been the main contribution negative to the performance of the local debt emerging markets. Now, however, The foundations on which he rests The green ticket they are no longer so solid – they underlined -. In our opinion, the dollar entered a period of structural weakness, not least due to the uncertain political context in the United States. Our Fair Value model shows that the dollar is overrated by 20% Compared to the currencies of emerging markets if compared to its long -term average. We believe that this gap will be reduced in the coming years, hand in hand with the further enlargement of the GDP growth differentials between emerging and developed economies compared to the current level (the maximum of the last 14 years) “. In general, a weaker dollar should calamite international capital towards emerging markets.
Favorable monetary conditions and inflation
In addition to the favorable dollar movements, also Eleeons of monetary conditions They should encourage emerging economies, which would attract even more capital in local bond markets. Three quarters of the main central banks in the world are already under the ease of monetary policy, while the three major (the Federal Reserve US, the European Central Bank and the People’s Bank of China) provide monetary stimuli. Analysts point out that the inflationary dynamics of emerging countries is also positive. The inflation rate in emerging economies has been falling since 2022 and it is likely that the pressure on prices will raise further this year.
The Chinese push
Finally, the analysts of Pictet Asset Management believe that a Another stimulus For this asset class It will be the Chinese economic recovery. “China is starting to see the fruits of the slow rebalancing of its economy in favor of internal consumption – they point out – at the same time, Beijing has committed to use the monetary and fiscal policy tools he has to help counterbalance the negative impact of US duties. The positive effect will affect on the rest of the emerging world, in particular on Asian economies developingor the major commercial partners of China and, equally important, for the emerging market obligations in local currency that represent almost half of the reference index “.
