Investors should be cautious on the rally in emerging markets because a rise in global interest rates will cause a selloff in all risk assets, Jeffrey Gundlach, the co-founder and chief executive officer of DoubleLine Capital LP, said last month. High foreign ownership of local-currency debt markets is setting them up for a hard landing if global monetary policy tightens, analysts at Deutsche Bank AG said this month.
The Federal Reserve said on Wednesday it will next month begin winding back an unprecedented bond-buying program that has pushed down borrowing costs. The central bank’s intention to press ahead with another rate hike this year and three more in 2018 caught some investors by surprise, sending bond yields and the dollar higher.
“We’re living in times which are pretty extraordinary in terms of central bank policy, so comparing current prices to history can be misleading,” Deutsche AM’s Hille said. “From a risk-reward perspective, you still get compensated in emerging markets and the prospects are better.”
This article was provided by Bloomberg News.