Economic and Market Commentary

Emerging Markets: Positioned for Growth

As the cyclical upswing takes hold, emerging markets are likely to benefit from the recovery. Andrew Balls, CIO Global Fixed Income, explains PIMCO’s view.

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Text on screen: PIMCO

Footer Overlay: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized

Full page graphic: Images of emerging market countries

Text on screen: Andrew Balls, CIO Global Fixed Income

Looking at the growth trajectories for emerging markets and comparing that with the developed world, emerging markets are a key beneficiaries of the cyclical upswing we're seeing,

Full page graphic: Images of shipping, oil, tourism and air travel

that's important for export markets, for commodity sectors. And in terms of the domestic sectors, the domestic services sectors where we see a growth driver as lockdowns are eased. Tourism, air travel, those kind of sectors, which can be quite important to EM, is something where the recovery will be, you know, late this year or into 2022.

Text on screen: LIST – How emerging markets will likely recover geographically, BULLETS – Asia will lead, Followed by Europe and Latin America

By region Asia, leading in terms of the emerging market recovery followed by Europe, followed by Latin America.

When it comes to external debt you get about five and a quarter percent yield, give or take, for the hard currency, EM index, that looks quite attractive. we don't see in the near term at least, near term, a lot of, default risk there. So relatively attractive yield. And then of course, with EM it's always, country by country

Full page graphic: Images of South Africa and Peru

So, South Africa would be one example or Peru is another favored by the EM team in terms of local, local debt exposure.

Text on screen: LIST – Top takeaways, BULLETS – Importance of active management, Flexibility, Patience

The top takeaways for investors, we've emphasized in our cyclical outlook and importance of active management, the importance of portfolio flexibility and the importance of being patient.

Emerging markets, in terms of asset allocation, emerging markets, local external debt remains attractive as part of overall asset allocation strategies.

Text on screen: For more insights and information, visit pimco.com

Full page graphic: PIMCO 50, 1971 to 2021

Disclosure


IMPORTANT NOTICE

Please note that the following contains the opinions of the manager as of the date noted and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.

The continued long term impact of COVID-19 on credit markets and global economic activity remains uncertain as events such as development of treatments, government actions, and other economic factors evolve. The views expressed are as of the date recorded, and may not reflect recent market developments.

All investments contain risk and may lose value. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be appropriate for all investors. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value.

Concentration of assets in one or a few countries (or a particular area) and currencies will subject a portfolio to greater risk than if the assets were not geographically concentrated.

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CMR2021-0423-1615119

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