EM debt set to outperform despite elevated inflation expectations

ON SPECIALIST MARKETS

Investec Asset Management's Peter Eerdmans explains why emerging markets are better equipped to stave off languishing growth.

Overall, it is difficult to ignore the deterioration in economic data coming out of emerging markets. However, our analysis has revealed this deterioration has so far been a slowdown in the fast growth rates achieved in 2010 rather than a complete reversal. While PMIs are lower, many still remain above the 50 level that divides an economy between growth and contraction. Despite headline inflation declining in emerging markets, inflation expectations remain elevated while core inflation remains persistently above central bank targets. With real rates generally very low or even negative...