After the spring emerging market (EM) sell-off, the summer has so far seen a reversal in fortunes, with EM debt indices retracing some of their losses since the beginning of June. However, the stronger recent EM performance has seen increased divergence between regions, with trade tensions weighing on Asia in particular. With monetary conditions also tightening globally, can the rally continue?
Broad emerging market (EM) fundamentals at both the sovereign and corporate end
remain strong; however, the widening growth gap between the US and other
developed markets, in addition to rising core yields and stronger US dollar, has
created a challenging external environment for emerging markets.