These emerging market bonds are interesting in the New Year

Christmas shopping in Beijing

Frankfurt Anyone looking for interest today has to look into the distance. While bond yields are mostly zero or below in the traditional industrialized countries, there is still something to be gained in the emerging countries.

In the emerging markets, on the other hand, there are quite solid dollar-denominated papers that, even with exchange rate hedging, still bring a return of around 2.5 percent for euro investors. Markus Weis, bond expert at Vanguard Germany, does the math. Ken Leech, Chief Investor of Western Asset Management, comments: “Despite the tremendous medical and financial challenges, the ever-growing prospect of global economic recovery makes emerging market bonds attractive to investors.”

According to experts, China plays an important role here, especially since the country has just signed an investment agreement with the European Union. Goldman Sachs expects global growth of 6.2 percent in 2021, more than the average forecast of 5.2 percent. According to a study, Asia in particular should benefit from this.

The US bank relies on bonds from Chinese banks and other companies with a good credit rating, i.e. a BBB rating. In the high-interest sector, with poor credit ratings, the Chinese real estate sector is interesting. Goldman Bonds experts from India and Indonesia also find it attractive.

Weis von Vanguard also calls China “extremely interesting” because the country has overcome the corona pandemic well and is getting a more reliable trading partner in the new US President Joe Biden. The US fund company is best known for passive funds, but its Vanguard Emerging Markets Bond Fund is actively managed, using the JPMorgan EMBI Global Diversified Index as a benchmark. Mike Ridell, Portfolio Manager at Allianz Global Investors, also counts on countries whose economies depend on China, and mentions Chile’s copper exports as an example.

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