Report: Current capital market on the Emerging Markets

Significant amounts of capital continue to flow into EM bonds. Nevertheless, corrections in prices here and there may be on the horizon. Some of these setbacks have already happened, triggered by the latest mild increase in yields on US government bonds. The long-term outlook, i.e. over a horizon of several years, for the equities, bonds and currencies of most EM countries is still positive.

The currency recently came under pressure again. The trade deficit reached a new record high, and due to India’s strong dependence on oil imports no sustained improvement is expected in this regard. Over the long run, however, India’s equity market looks the most promising. Compared to companies’ projected growth, valuations are looking moderate and the planned concessions for foreign investors may result in new inflows of capital over the medium term.

The long-awaited liberalisation of the government bond market to allow access to foreign investors took place in February, but this was unable to provide Russian government bonds will any boost in the first few weeks. Indeed, over the course of the month a slight correction was seen in these assets. The rouble also found little support due to the falling oil price and the rate thus drifted sideways. A drop of around 4% was registered on the equity market, thus almost completely erasing the gains from January.

In mid-February, Hungary successfully placed two Eurobonds on the market and thus significantly improved its refinancing situation. There was keen demand from investors even without the prospects of an agreement with the IMF.


Please find the complete report in the attached pdf document