EM debt goes mainstream but mispricing offers alpha

Binaya Dahal

Editorial Intern, Financial Newswire

15 January 2026

Credit-rating upgrades and credible policymaking pushed emerging markets (EM) debt further mainstream in 2025 but opportunities to capture alpha remain across the globe, according to global investment manager, Ninety One.

The firm’s recent outlook claims the persistent widespread pricing inefficiencies despite a stellar year for asset-class performance provide such circumstances in both sovereign and corporate EM debt markets.

The report further adds the blurring lines between emerging and developed markets has driven a shift in perceptions, with the EM sovereign debt market cementing its status as a maturing and increasingly resilient asset class.

Co‑Head of Fixed Income at Ninety One, Peter Kent said EM sovereign debt boosted its appeal for many asset allocators due to its increasingly powerful portfolio diversification benefits.

“For many, the debate shifted from ‘why should I consider the asset class?’ to ‘how can I get the asset class to work for me?’,” Kent said.

Similarly, the outlook claims the EM corporate debt market proved its strength by showing resilience amid US tariff announcements that tested investor sentiments.

Co‑Head of EM Corporate Debt & CIO‑Middle East, Victoria Harling said that corporate debt valuations incorporate a ‘postcode premium’ that keeps spreads wider than developed peers despite robust fundamentals.

“A notable example is Turkey’s banking sector: in many ways, this ‘looks’ like an investment‑grade market but a challenging macroeconomic backdrop means that Turkish sovereign debt is stuck in the high‑yield category,” Harling said.

Regionally, EM Fixed Income Portfolio Manager, Thys Louw said Africa offers a wide spectrum of opportunities with the Nigerian naira attractive for carry and Senegal’s hard‑currency debt on a positive trajectory.

Across Asia, the outlook has predicted subdued inflation and modest growth to result in further interest rate cuts but urged caution in Thailand due to political uncertainty.

In Latin America, the report has urged investors to watch carefully for signs of fiscal loosening or premature monetary policy easing as elections are scheduled to take place in several major economies in the coming months.