Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at

Emerging market corporate credit comes of age

by Dylan Lobo on Dec 28, 2012 at 07:00

This increased market sophistication is illustrated by the rise of the Emerging Market Corporate Bond index, which hit a capitalisation of $469 billion (£292 billion) at the end of September, surpassing its $463 billion sovereign debt equivalent for the first time.

On top of this, JP Morgan expects corporate debt issuance to reach $255 billion this year, dwarfing the $80 billion for sovereigns.

Quality matches sector growth

Marge Karner, senior emerging market debt (EMD) portfolio manager at HSBC Global Asset Management, expects corporate credit to take the EMD limelight within five years. She also emphasises the quality of the debt, pointing out the corporate universe is more than 70% investment grade, with 80% of new issues expected to be of this standard in 2012.

‘High credit quality is supported by the strong balance sheets of these emerging market companies,’ Karner says. ‘Since current global growth is mainly driven by emerging market countries, many EM corporates also enjoy strong organic growth, which further strengthens their balance sheets and keeps average leverage low despite increased issuance.

‘Additionally, EM corporates still enjoy favourable cost structures compared with developed markets (DM) and are further sustained by more attractive labour force demographics. The macroeconomic environments of many emerging market countries have transformed over the past decade and now offer a stable operating base to private companies.

‘In many ways, the comparison of emerging market corporates to developed market peers mirrors the comparison of emerging sovereigns to developed sovereigns.’

Standalone asset class

Aberdeen, which has built its reputation on EM equities, has identified the compelling opportunity in corporate credit. The firm believes the sector has come into its own as a standalone asset class and highlights several reasons why it has become a viable alternative for fixed income investors.

These include diversity, a wider investment base and low default rates, along with the significant increase in the size of the market and good liquidity supported by greater issuance.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home

As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Sponsored Video: Barings on investing in Frontier Markets

From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:


On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet