Tailwind from Economy and Monetary Policy
The economy in emerging markets is picking up noticeably: Economists expect economic growth of around four percent for 2025 and 2026 – significantly more than in the USA. At the same time, inflation is falling, creating room for further interest rate cuts. The ongoing weakness of the US dollar also increases the attractiveness of the asset class.
Compared to US high-yield bonds, EM corporate bonds show remarkable stability. Even in volatile phases—like recently around "Liberation Day"—risk premiums rose only moderately. Additionally, the duration is significantly shorter at an average of 4 to 4.5 years than for US bonds, making them less interest rate sensitive.
Attractive Ratings with Manageable Risk
The debt burden of many companies in emerging markets is well manageable, the yield spreads are high relative to the debt. This provides investors with attractive returns at relatively low risk. Experts expect that this combination could lead to massive inflows – a self-reinforcing effect that is likely to drive prices further.
Opportunities in Latin America, Asia, and Central Asia
Particularly interesting at the moment are markets with strong domestic economies. In Latin America – in Brazil, Peru, or Argentina, for example – issuers benefit from the growing domestic market and minimal impact from potential US tariffs. In Argentina, reforms, an IMF loan, and declining inflation provide a fresh boost. Colombia offers attractive entry opportunities following political turmoil.
Chinese technology companies with solid balance sheets and focus on artificial intelligence also promise potential – the regulatory environment is likely to be supportive here.
Beyond the major markets, countries like Uzbekistan come into focus: Stable growth, low debt, and minimal export dependence on the USA make local gold and gas companies interesting investment targets.
Conclusion: Best Opportunities in a Decade
Whether Peruvian gas producer with secured off-take contracts or Uzbek gold miner - corporate bonds from emerging markets are currently convincing with attractive valuations, solid fundamentals, and a favorable macroeconomic environment.
For investors with a long-term horizon and diversified strategy, now is the ideal time to enter this asset class – before the expected capital flow drives valuations up.
