Developments in EM debt support positive growth despite volatility

Emerging market debt held up well relative to other asset classes in 2008, and in 2009 has performed strongly as global financial markets have rallied.

Other asset classes may find it difficult to maintain these levels in the near term. Despite the market turmoil in 2008, the asset class has managed to provide annualised returns in the region of 15% since 2001. Diversification benefits are attractive, with correlations to other asset classes remaining relatively low, while high Sharpe ratios indicate that, despite higher volatility in emerging market local currency debt, the return for each unit of risk is high. Sentiment continues to improve and there have been positive surprises in terms of domestic demand and export data in some e...