Portfolio managers and emerging market debt specialists Jennifer James and Ales Koutny analyse emerging market (EM) country fundamentals and consider how they influence opportunities for investors.

Key takeaways

• EMs are ahead in their tightening cycles relative to developed markets (DMs), but further divergence between countries will emerge in their differing paths to normalisation.
• Assessing economic fundamentals can indicate how the inflation and growth outlook could look for EM countries this year and their resilience against volatility from a rising rate environment.
• As inflation wanes during the second half of 2022, we believe real rates could turn more positive in some EMs while lessons learnt from how EM asset classes perform during a rate hiking cycle could be instructive for investors and asset allocation decisions.

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