It’s a difficult time to like EM corporate bonds.

In the first instance, valuations are expensive. In fact, emerging market corporate bonds now trade at a tighter spread than emerging market government bonds.


Source: JP Morgan. CEMBI is the EM corporate index, EMBIG the EM sovereign index.

In addition, the greater part of the build-up in leverage in emerging markets in recent years has been on private balance sheets, not on those belonging to governments.

At Kames, our focus is on those stronger sovereign balance sheets. However, we can and do buy the debt of emerging market companies when individual credits’ valuations and fundamentals are attractive. It’s a highly selective approach that takes advantage of price dislocations and disruptions – a necessary approach, too, in what has become an expensive corner of the market.