The WSJ‘s Riva Froymovich highlights a new trend among investors in the article In Emerging Market Debt, the Riskier the Better.
Since the start of 2010, investors have been moving out of higher rated emerging market bonds and into debt issued by lower rated sovereigns. The prospect of tightening credit in China and a debt crisis in Greece are two of the trends driving international investors to look for other opportunities.
Froymovich points out that exchange traded funds or ETFs are a popular way to gain exposure to riskier emerging market debt. For example, the top assets in the PowerShares Emerging Markets Sovereign Debt Portfolio ETF (PCY) include bonds issued by Ukraine, Indonesia, Venezuela, El Salvador and Turkey.