EMD hard currency is attractive despite the recent rally

Emerging markets credit spreads have tightened significantly since reaching once-in-a-decade wides in March and April. The rapid turnaround was driven by the bottoming-out of fundamentals, the Fed’s supportive actions and extremely attractive valuations. Even after the strong rally of the past few months, we believe EM hard currency presents a compelling investment opportunity at current spread levels. 

Developing countries stand to benefit from supportive lending programmes and near-zero rates in developed markets, and historical return patterns show that the period of tightening may be far from over.

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