The best opportunities may be in government bonds and betting on the currencies of Brazil, Mexico and South Korea.
Investors looking to diversify across emerging markets will find a more complex landscape than the bipolar world of the Cold War or the Western-led global order that emerged afterwards.
The best opportunity looks to be within emerging market hard currency sovereigns – government bonds issued by emerging market countries in stable currencies such as US dollars. There is value in emerging market corporate BB-rated and BBB-rated bonds in countries such as India and Mexico that are growing strongly and benefiting from this shift away from China.
Many of the most preferable emerging markets currencies tend to be high carry, or are benefiting from relatively higher growth and flows.In Asia, relative value positions favour Indian rupee and Philippine peso versus the New Taiwan dollar.