VanEck

Fine-Tuning Portfolio Exposures

Index design typically reflects market conventions and investor behavior, but can have unexpected and surprising impacts on portfolio exposures. Because there is virtually no overlap with U.S. high yield corporate benchmarks, and because investors may already have exposure to investment grade emerging markets corporate through a U.S. corporate bond allocation, we believe that emerging markets high yield corporate bonds can allow investors to better calibrate their exposures to achieve desired outcomes.

Market Realist

Empirical evidence has shown that emerging market (or EM) high yield corporate bonds (HYEM) have outperformed and provided better yields than US counterparts in the past. Improving fundamentals and lower credit and interest rate risk have made EM high yield corporate bonds attractive this year.

How Emerging Market Bonds Can Enhance Investors’ Portfolios

They also have lower default rates than US counterparts as shown in the chart below. Franklin Templeton mentioned in a research piece last month that according to credit rating agency Standard & Poor’s (or S&P), EM corporate bonds had a lower default rate than US corporate bonds in 15 out of the 17 years up until 2017.

How Emerging Market Bonds Can Enhance Investors’ Portfolios

A post on the emerging market corporate bond outlook for 2019 by Erste Asset Management also discussed the positive trends in the emerging market economies currently. For example, the new government in Brazil seems to be taking better reform measures after the elections in Brazil. Many EM economies are in a better position when it comes to debt levels. Given the long-term economic growth prospects for emerging economies, investors may want to consider enhancing their portfolio with emerging markets bonds.

Investors interested in high yield corporate emerging markets bonds can consider the VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM). Of course, it’s important to mention that every investment carries some risk, and choosing to invest in emerging markets includes currency risk, credit risk, default risk, and market risk. Thus, investors should weigh the pros and cons before making investment decisions.

Latest articles

On Tuesday, Tesla (TSLA) cut the prices of its vehicles to standardize its global car line-up, according to Reuters.

Yesterday, PayPal (PYPL) announced that it would expand Xoom, which is its international money transfer service, to 32 markets in Europe.

Visa stock has risen about 37% and has outperformed the S&P 500 Index so far in 2019.

16 Jul

What to Expect from Skechers’s Q2 Results

WRITTEN BY Sharon Bailey

Skechers (SKX) is set to declare its results for the second quarter after the markets close on July 18. Here's what you should know.

On Tuesday, Canadian Pacific Railway (CP) reported strong second-quarter earnings. The company's top and bottom lines touched a record mark.

16 Jul

What to Expect from Crown Castle's Q2 Results

WRITTEN BY Sushree Mohanty

Crown Castle International (CCI) is scheduled to announce its second-quarter earnings results on Wednesday after the market closes.