Morgan Stanley says emerging-market bonds should rally in 2019

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December 27, 2018 11:07am NASDAQ:EMB

Emerging Markets

From Aline Oyamada and Justin Villamil: Robust growth in emerging markets, a less aggressive Federal Reserve, a trade-war detente and attractive valuations will support a rally in developing-nation bonds next year, according to Morgan Stanley Investment Management.

The firm is betting on Argentina’s sovereign local and hard-currency bonds and local debt in Brazil and South Africa. On the corporate side, it favors bonds from Latin America and Asia over developing nations in Europe, which will be dragged down by Turkey. Brazilian pulp, meat and infrastructure companies are particularly attractive, according to money managers Eric Baurmeister and Warren Mar.

“We should start 2019 in a better place given where spreads have moved versus where valuations started at the beginning of this year,” Mar said in an interview.

Emerging-market assets sold off this year, pressured by a stronger dollar, higher interest rates globally and trade tensions between China and the U.S., the world’s two biggest economies. Stocks entered a bear market in October when Treasury yields crossed the 3.2 percent level, hard-currency sovereign bonds are headed for their first losses since 2013 and all major developing-nation currencies are set to end the year in negative territory.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) was trading at $103.24 per share on Thursday morning, up $0.19 (+0.18%). Year-to-date, EMB has declined -9.93%, versus a -8.97% rise in the benchmark S&P 500 index during the same period.

EMB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 28 ETFs in the Emerging Markets Bonds ETFs category.

This article is brought to you courtesy of Yahoo! Finance.

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