Standard Life Investments' head of emerging market debt, Richard House, said the performance of emerging market foreign exchange, local currency bonds and sovereign credit continues to be “well differentiated and driven to a large extent by country-specific factors”.
“Recent EM data has surprised on the upside at a time when data from China and parts of the developed world, especially the US, has disappointed,” Mr House said.
“Most significant has been in Eastern Europe, led by manufacturing and exports, while export growth has been particularly strong in a number of Asian economies, notably Malaysia and the Philippines.”
Mr House also noted the recent credit rating upgrade received both by Mexico and Paraguay, with Mexico achieving an 'A' grade rating for the first time in the country's history.
Reforms in Mexico are expected to “strengthen the country’s potential growth prospects and fiscal fundamentals”, he said.
The elections taking place in Indonesia and Brazil, Mr House believes, could also generate positive outcomes for emerging markets.
While elections often trigger volatility in financial markets, in these countries they may lead to structural reforms, he said.
Standard Life Investments currently holds no exposure to countries where political risks have intensified, such as Russia, Turkey and the Ukraine, but remains heavily weighted towards Colombia, Mexico and Romania, according to Mr House.
“A record amount of external debt issuance so far this year has been easily absorbed, which points to sustained institutional appetite for [emerging markets] debt despite retail outflows,” he said.
