Emerging Markets: From Niche to Necessity

BlackRock

Leland Clemons

Research

13 Pages

BlackRock explores how emerging markets evolved from speculative satellite allocations into increasingly mainstream portfolio exposures as liquidity, governance, and index inclusion improved. The paper challenges outdated assumptions around currency volatility and diversification while highlighting China’s rise and the growing institutionalization of EM debt markets.

Key Takeaways

Investment Grade Shift: 50% of EM hard currency debt carried investment grade ratings in 2017 versus nearly 0% in 1993, reflecting materially improved sovereign and corporate credibility.
China’s Expanding Weight: China grew from a negligible MSCI EM Index allocation 20 years ago to the benchmark’s largest country exposure by 2017, reshaping emerging market concentration and sector dynamics.
Lower Yield Volatility: From 2007 to 2017, the JP Morgan GBI-EM Global Diversified Index yielded 6.5% with 0.5% monthly volatility versus 2.4% and 0.9% for developed markets.
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