Emerging markets:
Move when others hesitate

Where can investors find opportunities? Where are the pockets of risk to avoid? Our portfolio managers explore consumer behavior in the tech and consumer staples sectors, and growth in emerging markets. We expect investor focus to shift from virus-induced disruptions to the pace of economic healing and we remain confident about market prospects ahead.

Directly comparing old style Tier 1 to new AT1 bonds obviously disregards the numerous differences between these securities, but to us it does suggest that once the wider investor base has witnessed the resilience of the banks through this period of economic stress, there is still considerable upside from current spread levels as investors price in the structural changes that have occurred in the sector.

So while we certainly expect unemployment to increase across Europe, and we expect more borrowers will fail to pay their mortgages, we believe current mortgage performance is very far away from a level that would threaten coupon and principal payments in the major European RMBS markets.

The Regional Comprehensive Partnership (RCEP) shifts the world economyʼs center of gravity more towards the east, allowing China to expand its economic influence. However, the real economic effects of the agreement will hardly be felt before 2022 and European and US companies are likely to face more obstacles in the region.

Setting his sights on the near-term horizon, Frank warns investors to buckle up for a volatile ride but also reveals why, despite the possibility of rough seas ahead, he maintains a risk-on stance in equities.

After a volatile and unprecedented year in global markets, Head of Emerging Market Bonds Luc D’hooge and Head of Emerging Market Corporate Bonds Wouter Van Overfelt recently held a call for investors. We now provide you with access to recordings of both calls, where Luc and Wouter explain their investment approach and give you their outlook for emerging market sovereign and corporate debt.

During the lockdown period, Portfolio Manager Christian Hantel discovered the joys of gardening and learned that it has a lot in common with bond investing. In this Viewpoint, with the help of a few trees, Christian explains how investors can still find income and portfolio stability in a yield-starved world.

Why should investors care about ESG and why has the focus on ESG increased over the last several years? We believe the answer lies partly in the uncertain times in which we live. ESG shines a light on stability. It is not a luxury, but a critical part of risk management.

Emerging market corporate bonds are an inefficient asset class, according to portfolio managers Wouter Van Overfelt and Sergey Goncharov. In this case study, they show how investors can benefit from exploiting those inefficiencies.