Donald Trump’s return to the White House has shocked many investors. Already, rattled emerging market bond markets have significantly dented foreign investor confidence. A stronger dollar, combined with the risk of tariff hikes, has accelerated capital outflows. Meanwhile, the depreciation of local currencies is fuelling inflation, making it harder for central banks to balance monetary policy without worsening investor flight.

China faces particularly tough choices: either allowing further yuan depreciation or implementing fiscal stimulus that could push inflation even higher. Rising geopolitical tensions with the US add another layer of uncertainty to Chinese bonds.

Despite these risks, selective opportunities remain. India stands out as a relatively insulated market with strong domestic fundamentals, while Argentina and Sri Lanka present high-yield bond potential amid ongoing reforms. Additionally, certain sectors, such as Asian technology supply chains, may benefit ASEAN countries by attracting greater US investment.

In this volatile environment, tactical positioning is crucial. With many of Trump’s policies already priced into markets, some emerging economies may prove resilient. Potential mispricing could also create attractive entry points once initial turbulence subsides. For those adopting a strategic approach, this period of economic realignment may well offer compelling opportunities in selective emerging market bonds, particularly in regions with low external debt and strong domestic consumption.

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