The importance of staying local

Emerging market local currency debt has rallied since the beginning of 2017, with most of the move higher driven by the currency exposure. Is there still room to run in this sector?

Emerging market debt has been boosted this year by stronger growth and improving corporate fundamentals, and more recently by dovish minutes from the last Federal Reserve meeting and a lack of clarity around any US fiscal stimulus programme. Emerging market growth has been better than expected, driven by a recovery in Brazil and Russia, as well as a stabilisation in China. Emerging market industrial production growth is at a three-year high, and both retail sales and export volumes are picking up. Equally, corporate fundamentals are improving thanks to better earnings and steadying leverage.