Grant Webster
Ninety One’s, Grant Webster, Co-head of emerging market sovereign & FX discusses the compelling reasons why Australian investors should be considering a standalone allocation into Emerging Market (EM) debt. Compared to many other developed markets, he believes Australian investors can find themselves in an advantageous position to be able to unlock returns from EMs more efficiently.
In a landscape marked with increasingly divergent monetary and fiscal policy, the diversification properties of EM debt allocation have risen in importance.
Webster notes, “Emerging markets exhibit resilient fundamentals and proactive policymaking, setting them apart in the current economic landscape.
“Today, emerging markets are approximately 15 per cent through their cutting cycles on average, significantly ahead of their developed market counterparts.
Despite these positive developments, current valuations in EM debt remain attractive, offering an attractive entry point and significant yield pick-up relative to domestic Australian fixed income.
“Australian investors are well-positioned in the EM debt landscape, benefiting from the Australian dollar’s natural hedge and the potential to enhance risk-adjusted returns through hedging strategies.”
Furthermore, many emerging economies have successfully rebalanced post the Global Financial Crisis (GFC), boasting impressive debt-to-GDP ratios and other vital metrics.
Webster concludes, “The opportunities within EM debt are evident, recognising the ability to diversify portfolios and capture attractive returns amidst the evolving global market dynamics.”
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