An overview of emerging debt including correlations with other asset classes, risks (volatility, default, interest rate, currency), investment vehicles, and benchmarks. Exhibits cover market capitalization, credit quality, country debt ratios, Brady bond yields, benchmark returns, and fees and performance data on representative emerging debt managers.
To gauge the effect of MSCI Emerging Markets Free’s stunning rally on their valuations we use four metrics—price-to-earnings, price-to-book, price-to-cash earnings, and dividend yield—to compare current valuations to historical emerging markets valuations and to developed markets equity valuations. Although the end result is unequivocal, we nevertheless find that emerging markets equities remain inexpensive.
Argentina may have dodged the bullet with its recent debt swap, but pressures will continue to build. Because emerging markets are notoriously volatile and unpredictable, risk-averse investors should tread cautiously in this asset class for the time being.