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Emerging Debt Valuation Update: 4Q18

By Carl Ross and Victoria Courmes

Emerging Debt Quarterly Valuation Update

4Q 2018

Executive Summary

As we enter 2019, our valuation metrics for external emerging debt reveal an asset class that is much more attractive than it has been in recent years, due in large part to a significant sell-off in sovereign credit spreads in the fourth quarter of 2018. Local market debt sharply outperformed external debt during the quarter, which impacted relative valuations between the two asset classes. However, emerging currencies remain at the cheap end of our neutral range. As for local rates, while the gap between the emerging and developed markets real yields remains wide, emerging real yields fell below their historical average, due to a sharp rally in the fourth quarter.

In this piece, we update our valuation charts, and provide our readers with some small changes in methodology that we have adopted. (See the Appendix for more detail.)

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Disclaimer: The views expressed are the views and understanding of Carl Ross and Victoria Courmes through the period ending January 2019 and are subject to change at any time based on market and other conditions. While all reasonable effort has been taken to insure accuracy, no representation or warranty for accuracy is provided nor should be assumed. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.
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