The recent sell-off in emerging market corporate bonds has presented an opportunity for investors to enter the market, Muzinich portfolio manager Warren Hyland has said.
Hyland, who is Citywire A rated, said in a whitepaper that he believes the recent volatility surrounding EM coporate bonds is a result of geopolitical turmoil and single-country event risk.
Yields on short duration bonds have now climbed higher, which he said offers an attractive entry point.
‘In addition, based on our internal analysis, valuations have fallen and the asset class currently looks cheap, especially relative to Western markets,’ Hyland said.
‘However, this does not mean that EM corporate bonds are cheap, because the fundamentals have deteriorated and therefore the risk has increased. In our view, the fundamental investment case for EM remains intact and robust.’
He also noted that EM economies are benefiting from the ‘synchronised global growth backdrop,’ as well as political risk which has ‘largely improved on the whole'.