A reversal in global inflation trends is pushing investors to look toward emerging market bonds for better returns, and many — including Ninety One and Morgan Stanley Investment Management — see plenty of road ahead for the rally to continue, Bloomberg reports.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

For the first time in 35 years — bar a small Covid-era blip — prices grew slower in emerging nations than their developed counterparts for two straight quarters, according to indexes tracked by the business news service’s mighty terminal. During 3Q, inflation in EMs averaged 2.5%, while developed nations saw prices rise at an average of 3.3%

Lower EM inflation has cranked up forecasts of interest rate cuts, with the list of emerging nations deciding to begin cutting rates growing and their central banks cutting at a faster speed than the US. But there’s still plenty of wiggle room, according to Ninety One Emerging Market Sovereign and FX Co-Head Grant Webster, who estimates that real policy rates in EMs are their highest in 20+ years.

In turn, this has helped push the average returns on EM local bonds in some countries like Egypt to over 20%. The average across all EMs comes out at around 7%, which is a decent peg above US Treasuries for the year so far. Good news for EM local bonds is also good news for EM currencies, with many strengthening against the greenback following investor appetite for their debt.

EM disinflation outpacing developed nations is also helping increase interest in assets outside of Wall Street and Europe. The difference in risk between equities from EMs and developed countries is narrowing, and the “emerging world looks relatively less risky than DM for the first time in a long time,” Allspring Global Investments Senior Portfolio Manager Derrick Irwin told the outlet.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning as investors react to the US House passing a funding bill that will end the government shutdown. Japan’s Nikkei is leading gains, up 0.3%, with the Shanghai Composite and Kopsi trailing behind. The Hang Seng is in the red, down 0.5%.

TASI

11,255

-0.1% (YTD: -6.5%)

MSCI Tadawul 30

1,465

-0.4% (YTD: -3.0%)

NomuC

24,137

+0.2% (YTD: -23.3%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

4.5% repo

4.0% reverse repo

EGX30

40,229

-0.1% (YTD: +35.3%)

ADX

9,994

-0.4% (YTD: +6.1%)

DFM

6,042

-0.5% (YTD: +17.1%)

S&P 500

6,851

+0.1% (YTD: +16.5%)

FTSE 100

9,911

+0.1% (YTD: +21.3%)

Euro Stoxx 50

5,787

+1.1% (YTD: +18.2%)

Brent crude

USD 62.71

-3.8%

Natural gas (Nymex)

USD 4.54

0.0%

Gold

USD 4,205

-0.2%

BTC

USD 101,605

-1.2% (YTD: +8.7%)

Sukuk/bond market index

916.29

+0.1% (YTD: +1.6%)

S&P MENA Bond & Sukuk

151.90

+0.1% (YTD: +8.5%)

VIX (Fear gauge)

17.51

+1.3% (YTD: +0.8%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 4.2 bn. The index is down 6.5% YTD.

In the green: SVCP (+5.8%), Derayah (+5.0%) and SRMG (+4.6%).

In the red: Sisco Holding (-4.4%), Saic (-3.9%) and Jahez (-3.4%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.2% yesterday on turnover of SAR 22 mn. The index is down 23.3% YTD.

In the green: Apico (+8.6%), Alrazi (+6.7%) and Axelerated Solutions (+6.1%).

In the red: Hamad Bin Saedan Real Estate (-8.4%), HKC (-8.1%) and NBM (-7.5%).

CORPORATE ACTIONS-

United Wire Factories’ (Aslak) board greenlit a SAR 14 mn dividend payout on 4Q 2024 retained earnings and 9M 2025 income at SAR 0.5 apiece, it said in a disclosure to Tadawul yesterday. The distribution date is set for Monday, 8 December.

Tags: