By Rashique Rahman, Head of Emerging Markets Debt
Emerging markets debt outlook by Invesco US
Emerging markets (EM) assets had a favorable first quarter likely driven by an improvement in external funding conditions and global central bank moves towards policy accommodation. EM credit outperformed the more volatile EM local debt over the period.
Going forward, concerns over global growth are expected to result in bouts of market volatility, though we favor increasing exposure to EM credit and local currency due to our expectations of continued global central bank policy accommodation and global growth stability into the second half of the year. We also believe idiosyncratic country developments will remain prominent.
Risks to our view center around the potential for a sharper-than-anticipated downturn in global economic activity - particularly in the US, which would likely benefit the US dollar and tighten funding conditions for EM countries.