Emerging markets are presenting some very good fixed-income investment opportunities in their own local markets, with all of the favourable elements in place to make them attractive, according to Pimco co-head of emerging markets management team Michael Gomez.
Specifically, debt instruments being traded on local emerging markets in the particular country's domestic currency are providing very good value.
"When we look at local markets there are three characteristics that we find quite attractive that define this portion of the asset class," Gomez said.
The first of these characteristics Gomez cited is an increase in the credit rating of the investment.
"If you compare the local markets portion of the asset class to the traditional external debt portion of the asset class, you find that you move from a BB plus average credit rating in external to BBB plus today in local markets," Gomez said.
A better deal regarding duration was also associated with local emerging markets investments, he said.
"At the same time when you move to local markets you go down in duration," he said.
The final positive element of fixed-income investments in local emerging markets involves yield.
"Finally and importantly, you also go up in carry or up in yield," Gomez said.
"So for our clients, when we can identify shifts in an asset class that allow us to go up in credit rating, down in duration, and up in carry, we want to maximise those opportunities," he said.
