Emerging markets debt

Emerging countries have stepped up their debt issuance in recent years to create a growing and increasingly liquid market. Today, the market stands at an estimated USD400 billion* across Latin America, Eastern Europe, Africa, Emerging Asia and the Middle East, creating significant investment opportunities.

Originally confined to US-dollar denominated debt (‘hard currency’), there is also now a large market for bonds issued in the country’s own currency (‘local currency’).

A new capability at First State Investments

In October 2011, we established a new emerging markets debt investment team. Led by Helene Williamson, the team focuses on hard currency sovereign and corporate debt, as well as local currency markets.

Arrow First State Investments Emerging Markets Bond Fund

Arrow First State Investments Emerging Markets Pocket Guide

For institutional mandates, contact one of our relationship managers.

Helene Williamson provides an overview of emerging markets debt
Improved credit quality versus developed markets

For investors in sovereign bonds, the country’s ability to repay its debt is essential. With a Greek default early in 2012, investors are increasingly concerned about the debt levels in developed markets.
Emerging markets are in a very different position:

  • Debt-to-GDP ratios are only one-third of their developed peers. They are in a much better position to repay their debts, thanks to their superior demographic, fiscal and economic profiles 
  • Improved monetary and fiscal policies mean investors are increasingly confident in their long-term stability  
  • Independent ratings agencies have recognised this trend. Since September 2008, 117 ratings agency upgrades of emerging markets took place, compared with 68 downgrades from developed countries. **  

 *,**Source: J.P Morgan, September 2011.

News 

Helene Williamson on FT Video

Helene Williamson talks to FTfm about Emerging Markets Debt

First State's Head of Emerging Markets Debt thinks many investors have not fully appreciated the massive deterioration in the credit quality of developed markets since 2007.

General Risks

The value of investments and any income from them may go down as well as up. Investors may get back less than the original amount invested. Where shown, past performance information is not a guide to future performance. If you are in any doubt as to the suitability of any of our funds for your investment needs, please seek independent financial advice.

The following specific risks apply to the First State Emerging Markets Bond Fund

The Fund might also experience the following risks:

  • Emerging market risk: emerging markets may be subject to less developed banking practices, and may not provide the same level of investor protection as a developed market. Funds investing in emerging markets may involve a higher risk than those investing in developed markets.
  • Interest rate risk: the Fund's investments are affected by interest rates. If rates go up, the value of investments fall and if rates go down, the value of investments rises.
  • Currency hedged share class risk: Hedging transactions are designed to reduce, as much as possible, the currency risk for investors. However, there is no guarantee that the hedging will be totally successful and no hedging strategy can eliminate currency risk entirely. For further information on risks, please refer to the Risk Factors section in the Company's prospectus.