Most retail investors have been exposed to emerging market stocks, even if only in broad international equity funds, but many are novices when it comes to investing in bonds and currencies.
Given the debt and growth problems plaguing the U.S. and eurozone, and the resulting tumult across world stock markets , it might be a good time to look at these asset classes, say analysts.
“What's happened is now not only an interest-rate play but a currency play,” Mark Mobius, executive chairman of Templeton Emerging Markets Group, told CNBC. “You've seen these currencies in emerging markets strengthen over the last five years.”
And long term, emerging markets should return to fundamentals—meaning continued growth—which will benefit bonds and currencies.
“Eventually emerging market currencies and the [Chinese] renminbi [or yuan] will be coming to the forefront,” says Ivan Leung, chief investment strategist for Asia at J.P. Morgan Private Bank. “And local, emerging fixed-income markets offer real yields. Sovereign credit ratings and fiscal fundamentals are trending upwards,” Leung adds.
In the last two years, another phenomenon has been at play: Retail and institutional investors in search of yield are finding it in long-duration bonds in emerging markets denominated in local currencies, according to research compiled by UBS.Page 1 of 5 | Next Page