Emerging market debt offers diversification

EMERGING MARKETS

Emerging market external debt is establishing itself as a high-quality asset class, writes BlackRock's Imran Hussain

The proximate catalyst for recent volatility, in our view, has clearly been fear surrounding the eurozone sovereign debt markets, led by the deteriorating credit dynamics of Greece and other peripheral sovereign issuers. This culminated in the dramatic ECB/IMF and EU stabilisation package of around €750bn – roughly 8% of European GDP and thus considerably larger than any forecast. As worries about debt levels in a number of high income countries bring focus on sovereign fundamentals, emerging market sovereigns stand out as having much stronger balance sheets than many of their richer, de...