Investment ImplicationsOur cautious stance on the cyclical outlook combined with a constructive view on the structural and the global drivers suggests:
In other words, while EM local rates will move higher again as the business cycle progresses, the cyclical highs will likely be lower than the previous highs, reinforcing the secular trend towards lower rates. In practical terms, this has specific investment implications. We like local rates that have the following characteristics:
Putting these three considerations together – strong credit quality, high real rates and steep curves – the local markets of Brazil, Mexico and South Africa all stand out.
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