2019 Sector Teams' Outlook: Emerging Markets Credit, Local Debt & Currencies

By The Loomis Sayles Emerging Markets Sector Team |  23 February 2019
Emerging Markets

We remain cautiously optimistic on emerging markets (EM) in 2019 despite a challenging 2018.


Tightening global liquidity is a risk for EM asset prices, but we expect US Federal Reserve (Fed) rate hikes to moderate in 2019 as US growth decelerates. This should benefit EM issuers and improve appetite for risk assets.


We are constructive on the EM local currency space; we view the asset class as supported by the moderating pace of Fed rate hikes, benign global inflation backdrop and the recent uptick in fund flows.


We agree with the consensus estimate of 3.6% global growth for 2019, and see healthy EM corporate balance sheets continuing. We currently prefer short-duration bonds and, in the near term, higher-quality credits with attractive yield potential.


China is committed to long-term deleveraging efforts, but we anticipate short-term policy measures to help offset recent financial stress and the likely economic impact of rising protectionism.


At the end of 2018, Latin America was showing signs of improved growth, with certain economies in the midst of credit repair and recovery. We are mindful of potential policy missteps from new administrations—Mexico and Brazil stand out.

Disclaimer

The information in this article is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any person. Investors Mutual Limited (AFSL 229988) is the issuer and responsible entity of the Loomis Sayles Global Equity Fund (‘Fund’). Loomis Sayles & Company, L.P. is the investment manager.

This information should not be relied upon in determining whether to invest in the Fund and is not a recommendation to buy, sell or hold any financial product, security or other instrument. In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider the Fund’s product disclosure statement, available on the website www.loomissayles.com.au or by contacting us on 1300 157 862. Past performance is not a reliable indicator of future performance.

Investment in the Fund are not a deposit with, or other liability of, Investors Mutual Limited and are subject to investment risk, including possible delays in repayment and loss of income and principle invested. Investors Mutual Limited does not guarantee the performance of the Fund or any particular rate of return.