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Viewpoint: The attractiveness of emerging market assets is expected to increase
After the Fed cut interest rates by 50 basis points, Carlos de Sousa, portfolio manager of emerging market debt at Vontobel, said that the global financing environment will continue to ease in the coming months, which will help emerging market central banks continue their easing policies. This will create space for multiple emerging market central banks to restart or continue their easing cycles that have already begun before the Fed.
Lower risk-free rates in developed countries will also reduce external borrowing costs for emerging market issuers, thereby reducing refinancing risk and improving debt sustainability. The easing cycle will prompt asset allocators to increase their exposure to emerging markets as money market instruments and core developed country interest rates will gradually become less attractive.
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