The outlook for Emerging Market Debt is looking positive for a number of reasons:

1. Weakening dollar: emerging market debt - both sovereign and corporate - should benefit from the reversal of the US dollar cycle where benefits return in regional diversification by allocation through this asset class.
2. The return of income in Emerging Market Fixed Income: with yields at 8.5% on USD sovereign debt and attractive inflation adjusted yields in local debt, investors are now paid handsomely to invest in EM debt market¹.
3. Less inflation risk: emerging market central banks have acted early and decisively to contain inflationary pressures, allowing them to better control inflation than their developed counterparts and the ability to start the rate cut cycle earlier.
4. Emerging Market is not China: the emerging market is a very diverse universe that offers rewarding investment opportunities.

[1] Source: Pictet Asset Management, Bloomberg, as at 15 August 2023

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