Emerging Markets Credit Rating
Credit rating downgrades. Credit rating agencies assess the worthiness of all credit instruments. They have been busy downgrading the long-term foreign debt ratings of some emerging market (EM) and frontier market (FM) sovereigns. The ones that have felt the wrath have been predominantly heavy in oil and gas exposure as well as those facing an event-driven crisis. Bahrain, Greece, Kazakhstan, Oman, Nigeria, Russia and Ukraine have all been recently downgraded.
A few bright spots. Korea and Poland have a positive outlook assigned by Standard and Poors. This suggest that there is a possibility their credit rating may be raised. Also, sovereign debt in the Philippines was upgraded just over six months ago.
Safety is too expensive. Amidst the flight to safety, high quality bonds have been bid up and yields are now exceptionally low. At the short-end of the yield curve, some European sovereigns offer negative yields. From an asset allocation standpoint, it would make sense to pick up less expensive, quality, and high yielding equities that would also provide a decent clip of earnings growth.
Definitions
Credit default swap (CDS) is a financial contract whereby a buyer of corporate or sovereign debt in the form of bonds attempts to eliminate possible loss arising from default by the issuer of the bonds.
S&P credit ratings assist investors by evaluating the credit worthiness of many bond issues. AAA to BBB ratings are typically issued to those securities considered investment grade. The rating is not a recommendation to buy or sell a particular bond. For information on the rating agency’s methodology go to: http://www.standardandpoors.com/home/en/us.
Sovereign debt is the amount of money that a country's government has borrowed, typically issued as bonds denominated in a reserve currency.
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Emerging market investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, from economic or political instability in other nations or increased volatility and lower trading volume. Please call +1 888 800 4347 or click here access a prospectus online. Investing involves risk, including possible loss of principal.
Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.
The content of this material is presented for general information purposes only. The statements and opinions expressed are those of the author and are as of the date of this material. All information is historical and not indicative of future results, and subject to change. Readers should not assume that an investment in the securities mentioned above was or would be profitable in the future. This information is not a recommendation to buy or sell. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. This material may include estimates, projections and other "forward-looking statements". Emerging Global Advisors, LLC assumes no duty to update any such statements. Due to numerous factors, actual events may differ substantially from those presented. Past performance does not guarantee future results.
EGA and EGShares Funds are distributed by ALPS Distributors, Inc. Emerging Global Advisors acts as the investment advisor to the EGShares Funds. ALPS and Emerging Global Advisors are unaffiliated entities.
Emerging market investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, from economic or political instability in other nations or increased volatility and lower trading volume. Please call +1 888 800 4347 or click here access a prospectus online. Investing involves risk, including possible loss of principal.
Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.
The content of this material is presented for general information purposes only. The statements and opinions expressed are those of the author and are as of the date of this material. All information is historical and not indicative of future results, and subject to change. Readers should not assume that an investment in the securities mentioned above was or would be profitable in the future. This information is not a recommendation to buy or sell. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. This material may include estimates, projections and other "forward-looking statements". Emerging Global Advisors, LLC assumes no duty to update any such statements. Due to numerous factors, actual events may differ substantially from those presented. Past performance does not guarantee future results.
EGA and EGShares Funds are distributed by ALPS Distributors, Inc. Emerging Global Advisors acts as the investment advisor to the EGShares Funds. ALPS and Emerging Global Advisors are unaffiliated entities.
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