[ I N D E P T H | E M E R G I N G M A R K E T S ]
processes . These factors “ improve visibility and attract a wider variety of investors ,” asserts Flavio Paparella , managing director at BTIG global emerging markets fixed income , who adds that “ local currency bonds are now as regular investments as hard currency bonds ”.
Speaking to the increasing importance of emerging market bonds for desks going forward , Paparella highlights that the rapid economic growth of developing countries can re-value bond prices over time , enabling investment and infrastructure opportunities which further increase demand for bonds .
“ Many emerging markets are implementing structural
“ The timing is probably right for an improvement in sentiment […] and maybe for some funds to flow back into emerging markets fixed income .”
NIELS NOOY , EM EXECUTION SPECIALIST AT LIQUIDNET
reforms to improve their business environment and the economic growth that comes with it can positively affect the bond markets ,” explains Paparella . “ Investors are challenged to be mindful about where to invest within emerging markets .”
Despite these positives , currently , markets are in a bit of a waiting game when it comes to the space , and are , for now , anticipating an inflection point , say experts . But , of course , there is more to come , and the market is prepping .
Espinosa affirms that though for the last five or so years EM has had an overhang – related to events such as the pandemic , geopolitical risks and rising rates in developed markets which has placed pressure on the asset class - the market is very close to the tipping point where those factors are waning .
“ Traders are of course looking to maximise opportunities clearly and looking for an upside but how do you reconcile that with a challenging political environment or geopolitics ? That ' s always going to be an issue but our iFlow data shows that the EM fixed income sphere is just waiting for a trigger ,” adds Yu .
Shifting strategies Seemingly in preparation for this both firms and providers across the market are focusing in on how to take advantage of the space most effectively . One
38 // TheTRADE // Q3 2024