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Opportunity Knocks: The Case for Emerging-Market Corporates

2024年4月29日

1 min read

EM Corporates Have Stronger Fundamentals but Higher Yields

EM corporates’ leverage is less than 1½ times and DM’s more than 2½ times, and EM has more than twice the reserves.

Historical analysis does not guarantee future results.
Left display as of June 30, 2023; middle display as of December 31, 2022; right display as of December 31, 2023
Average credit quality as of March 31, 2024; HY = high yield; IG = investment grade
Source: Bank of America, Bloomberg, J.P. Morgan and AllianceBernstein (AB)

Emerging-market (EM) corporate bonds are too-often overlooked by investors who presume the asset class is too niche or too risky. But the aggregate fundamentals of EM corporates are stronger than those of their developed-market counterparts. For example, EM corporate net leverage ratios are significantly lower than those of US corporates, while cash reserves are much higher (Display).

The rating agencies have long acknowledged these comparatively strong fundamentals, which are reflected in average credit ratings. Moody’s rates investment-grade EM corporates and investment-grade US corporates comparably at A3, while rating high-yield EM corporates BB3, a full notch above high-yield US corporates at B1.

Yet, EM corporate bond yields are higher than those of most other markets. At 6.8%, the yield of the EM corporate market—with its average investment-grade rating—is on par with those of high-yield sectors, and nearly two percentage points higher than the yield of the investment-grade US corporate market.

To us, this disconnect between relative quality and relative yield represents an attractive opportunity. That’s why, in our view, EM corporate debt deserves a closer look.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

Investment involves risk. The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This article is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer of solicitation for the purchase or sale of, any financial instrument, product or service sponsored by AllianceBernstein or its affiliates. This presentation is issued by AllianceBernstein Hong Kong Limited (聯博香港有限公司) and has not been reviewed by the Securities and Futures Commission.

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