Emerging markets bond gain may derail due to geopolitics and unresolved trade tensions.
“We are bracing ourselves” for the US-China trade war to continue, said Angus Bell, a senior portfolio manager in emerging market debt at Goldman Sachs Asset Management, who doesn’t see a resolution to the trade dispute in the near future. The money manager expects “mid-single-digit returns” for the rest of the year in EM dollar bonds, he said.
Even after emerging-market dollar bonds scored a 9% return from Dec. 31, the most for any similar period in a decade, many investors still see them continuing to do well, as monetary easing burnishes the appeal of the higher-yielding assets.Brett Diment, head of global emerging markets debt at Aberdeen Standard Investments:
Most high-yield credits in China aren’t directly exposed to global trades and the recent correction offers some interesting entry points, such as in short-dated Chinese property creditsExpects local currency IG EM bonds to outperform in the second half with large risks surrounding Trump administration and trade disputesSome bonds of sovereigns that have bailout packages from the International Monetary Fund pay 7% or more and are attractive where central banks are stepping in to prop up...