Consistent with PIMCO’s overall investment philosophy, our approach to EM investing begins with a secular analysis of the global economy, which is fine-tuned on a cyclical basis. Within this framework we use a multi-step process to guide our emerging markets investment decisions. First, we identify countries with strong underlying credit fundamentals (including strong fiscal positions, stable/improving political situations, comfortable reserve levels and debt profiles that can withstand financial shocks, among others). We then consider the impact of our global outlook on these countries, including prospects for demand from major economies, commodity prices, interest rate trends and other components of the external environment. Finally, we evaluate the technical conditions of the credit to identify both the upside and the imbalances that could potentially lead to market dislocations.
This disciplined multi-pronged framework provides the basis for our country weighting, duration, curve, currency and instrument selection decisions, as well as relative value assessments. Our high quality emphasis allows us to optimize the set of strategies for a given investment environment while limiting downside risk.
The ways in which PIMCO aims to add value are also consistent across strategies. These decisions include:
PIMCO projects higher growth from emerging Asia for a number of reasons:
The rebalancing of global growth should facilitate enhanced growth leadership by emerging economies, especially emerging Asia. This in turn should be reflected in an appreciation of developing countries’ currencies versus the U.S. dollar.
For many years, investor perception of emerging markets has been as a set of high risk, crisis-prone countries, providing an appealing but volatile source of returns. As the asset class matures due to improved fundamentals such as fiscal and monetary reforms and favorable demographic trends, the asset class will likely perform well in the future. More recently, the performance of emerging economies during the global financial crisis also shows the extent to which structural changes have shaped these markets in a positive way. In particular, emerging Asia’s accommodative stance in monetary policy, alongside increased fiscal outlays, effectively engineered a sharp economic rebound in Asia. This is in marked contrast with the dramatic declines in output in many of the developed economies that had weaker initial conditions.
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All material contained on the Exchange-Traded Funds section of this website is purely for informational purposes only and is not intended as investment advice. Investors should seek financial advice before making any investment decisions.
The products and services are available only to residents of those jurisdictions. The information on this web site does not constitute an offer for products or services, or a solicitation of an offer to any persons outside of Europe who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. Copyright ©2017 PIMCO Europe Limited. All rights reserved.
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