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A Star is born
Weekly investor research
04 November 2013
One of the reasons to invest in Emerging Markets (EM) is the possibility of capturing the upside from rapid structural change.
This past week saw the birth of local currency corporate bonds as an EM asset class. We believe local currency corporate bonds
will become a star in the EM fixed income sky. Of course, the USD 5.8trn market has been around for much longer, but it was
only last week that Bank of America Merrill Lynch (BAML) formally launched the world’s first index for this asset class. Whilst the
BAML index is imperfect – it only represents 5% of the universe of local currency corporate debt – its existence enables
investors to tap into what could eventually become a USD 30trn asset class. Meanwhile, Europe produced the lowest inflation
print in Eurostat’s history; we discuss why inflation is so low in Europe and what this means for the Euro over the medium term.