Emerging market debt: A simple promise

Sep 1, 2012

A surge in demand for emerging market debt has seen investors pile into the asset class – but tight supply in Latin America could see the region overshadowed this year by Asia

By Mariana Santibáñez 

Emerging market credit started the year with an unprecedented bang. Funds piled into the asset class as new and existing investors upped their allocations in a seemingly relentless search for yield – as well as shelter from the global market storm.

Nowhere was the upsurge as apparent as in corporate credit, which has proved the fastest growing part of the asset class.

Although debt issuance by emerging corporates has slowed since January, inflows to the market remain robust: some $19.7 billion through August 15 was ploughed into emerging market dedicated bond funds which includes hard currency, local currency, sovereign and corporates in the first half of this year, according to EPFR Global.

Persistent zero or negative real yields in the developed world have meant that investors have flocked to emerging markets – and debt in particular – in search of higher yield. And the prospect that...

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