The Covid-19 crisis is weighing on global growth and corporate earnings, with negative effects on the outlook for emerging markets (EM) pushing many countries in recession.
But investors in emerging markets will appreciate that the asset class is full of variations and opportunities if you do your homework.
For those prepared to invest for the long term, shocks are nothing new, particularly within EMs.
The 2008 Global Financial Crisis and the US-China trade war are two recent examples of crises that we have learned from and that through strong active management, security selection and risk management - investors can weather such storms.
Emerging market central banks continued to slash interest rates throughout the pandemic, in order to buttress their economies.
This was partially driven by the sharp rally in developed market rates, and somewhat due to EM central banks' easing encouraged by a lack of inflation amid the economic slump.
But as we start to see signs of an economic recovery, rates in developed markets are backing out and in emerging markets, rates are no longer supported by expected action from central banks.
Therefore, the looming spectre of rising inflation in EMs will be the main challenge, combined with the risk of an oversupply of domestic debt issuance, driven by the need to finance the increased budget gap.
This is why investors should avoid local currency bonds such as Brazil.
On the other hand, some central banks kept their powder dry, eventually playing a 'catch up' game on easing, such as Mexico. As a pair trade, we like being long Mexican rates and short Brazilian rates.
But what opportunities are worth considering as developing nations put measures in place to kick start their economies?
As the debt restructuring in Argentina reaches its final stages, we are growing more optimistic that the restart with debt investors will give Argentinean assets a boost on equity side.
We like the energy company YPF, which will stand to benefit from supportive government policies and a normalisation of asset pricing in Argentina.
In the hard currency bond land, as investment grade in EMs fully recovered, we expect the high yield recovery to be the next pillar of normalisation.
For example, we see the strongest recovery opportunities in the Chinese property development sector.
With China's recovery underway, we see demand coming back swiftly to Chinese housing markets.
Yerlan Sydzykov, global head of emerging markets at Amundi
• Hard currency bonds in emerging markets will be the next pillar of normalisation following the recovery of investment grade EMs
• Government action indicates opportunities in Argentinian energy, Chinese housing
• Covid-19 still plunging many emerging countries into recession
• Looming spectre of inflation in EMs will be the main challenge, weighing on countries such as Brazil