From Turkiye’s investment grade looking banks stuck in high yield to Africa’s next frontier opportunity set, Ninety One maps where carry, reforms, and valuation gaps could matter most in 2026. Bottom line, EM debt looks more resilient, but selectivity is everything.
Institutional investors looking for diversification are being forced into an uncomfortable realisation, the old anchors are wobbling. With developed market bonds facing “mounting credibility challenges,” the diversification case for emerging market debt is strengthening, and not just as a tactical trade.
That is the central contention of Ninety One’s research, which argues EM debt has crossed a “turning point” year, earned mainstream relevance, and still offers fertile ground for alpha because mispricing remains widespread.
Peter Kent, co-head of fixed income, puts the portfolio case plainly, saying EM debt “rose in relevance” thanks to “increasingly powerful portfolio diversification benefits.” He also points to “credit-rating upgrades and credible policymaking,” as a tangible support for staying invested through cycles.
Kent’s most important observation is about how allocator behaviour is changing. “For many, the debate shifted,” he says, from “why should I consider the asset class?” to “how can I get the asset class to work for me?” That is not a philosophical pivot, it is a governance and implementation pivot for committees that now need to choose exposures across regions, currencies, and credit quality.
Victoria Harling, co-head of EM corporate debt and CIO, Middle East, argues that valuation anomalies remain structural. “Corporate debt valuations continue to incorporate a significant ‘postcode premium’,” she says, where country concerns keep EM spreads wider than developed market peers “despite robust underlying fundamentals.”
Her practical example is Turkiye. “In many ways, this ‘looks’ like an investment-grade market,” Harling says of Turkish banking, but macro conditions keep the sovereign, and therefore many corporates, in high yield. In that inefficiency, she argues, “investors can still earn relatively high yields on high-quality bonds.”
From there, the guide becomes a regional navigation map, built around one recurring message, opportunities exist across both sovereign and corporate markets, but selectivity is the price of admission. Africa is described as “the next frontier in fixed income,” precisely because the continent is not one trade, it is a set of sharply diverging opportunities.
Thys Louw, an EM fixed income portfolio manager, is specific about where carry and trajectory may be most attractive in Africa. “The Nigerian naira remains an attractive source of carry,” he says, while Senegal in hard currency is “on a positive trajectory,” supported by reforms and resilient regional market access.
Across Asia, the macro set-up is more conventionally bond friendly. Ninety One expects subdued inflation and modest growth to drive further rate cuts, particularly as governments pursue fiscal consolidation, an environment it says should support local bond markets.
Country selection still dominates outcomes. Malaysia is cited as relatively well placed, with foreign investment and resilient domestic consumption underpinning the ringgit, while Thailand “faces political uncertainty” ahead of February elections, which the note says warrants caution on the baht if fragile coalitions trigger renewed disagreement.
On the corporate side in Asia, Alan Siow, co-head of EM corporate debt, is blunt about pricing. “Expensive valuations mean greater selectivity is required,” he says, even as he argues the region is becoming the “global AI factory,” supplying infrastructure on which US-developed AI models will run.
CEEMEA is presented as a dispersion story, and that is exactly where active allocators tend to earn their keep. The note calls South Africa a “relative bright spot,” supported by fiscal discipline, reform momentum, and better anchored inflation expectations, while Turkiye’s stabilisation efforts are expected to continue, keeping lira carry in play despite persistent political risk.
In Central and Eastern Europe, Ninety One flags uncertainty around the extent of rate cuts, given relatively strong growth and a positive German fiscal impulse, with Hungary further complicated by a contested election. It also points to the Russia-Ukraine war as a key unknown, with any move toward a lasting peace deal likely positive for fundamentals and risk premia.
Harling also returns to the corporate opportunity set in the Middle East, calling it “a region to watch,” now “more than 100 issuers,” with most investment grade and supported by strong fundamentals. She adds that Saudi corporates “typically offer” spread pick-up versus equivalently rated Asian credit, while being less volatile.
Latin America, by contrast, is where politics takes the wheel. Nicolas Jaquier, an EM fixed income portfolio manager, says, “Politics will dominate,” with elections across major economies, and investors should watch for “fiscal loosening,” or “premature” monetary easing.
Jaquier is equally pointed on Venezuela, urging investors to “monitor closely” political developments, because successful restructuring needs “a legitimate government,” able to commit to reforms, typically anchored by the IMF. He also sketches spillovers, from Cuba’s exposure to discounted oil to Colombia’s potential trade gains if Venezuela stabilises and reopens.
Ninety One’s conclusion is that emerging marker debt has entered a “more resilient and mature phase,” yet “market mispricing remains rife,” so the opportunity for institutional investors is not in a single heroic call, it is in careful navigation across sovereign and corporate markets, currencies, and regions where dispersion is wide enough for skill, and discipline, to show up in returns.
