Stability comes from having the capacity to easily repay outstanding debt obligations, a feature of a growing number of emerging markets .
Brazil, Malaysia and Mexico, for instance, are now rated investment-grade markets and are part of global sovereign benchmarks like the Barclays Capital Global Aggregate Index .
“Emerging markets are a completely different ballgame than 10 years ago,’’ Orchard says. “The asset class had gone through six years of crises, but now a wide range of investors are looking at EM, not just for the better fundamentals, but also the [higher] yields.”
The widespread fiscal health of emerging markets makes ETFsa good way to gain sovereign exposure.
PowerShares Emerging Markets Sovereign Debt fund (PCY) and iShares JPMorgan USD Emerging Markets Bond Fund (EMB) invest in EM sovereigns denominated in U.S. dollars , which eliminates currency risk. PCY holds government bonds of 22 countries equally while EMB owns debt from 34 countries with weightings determined by market value.
Stronger emerging market economies should support currency appreciation versus the U.S. dollar, euro and yen. Franklin Templeton’s Hasenstab is particularly bullish on currencies in the Asia ex-Japan region.Page 3 of 4 | Prev Page | Next Page