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Emerging Rebound

We believe there is room for further improvement in emerging market debt (EMD) valuations.

The Federal Reserve’s and the Bank of Japan’s recent stimulus actions may help support EMD performance.

Slower growth may pose a challenge for EMD issuers, but cheaper valuations mean that investors may be compensated for potential risks.

The first quarter of 2013 witnessed the worst quarterly performance for emerging market debt (EMD) investors since 2008 and the peak of the financial crisis, as measured by the JP Morgan Global Emerging Market Bond Index. A moderation in EMD performance was to be expected after strong performance in 2012, but recent weakness appears to have run too far, given that many of the favorable longer-term trends underlying the asset class, such as stronger economic growth and lower debt burdens compared to developed country counterparts, remain in place.

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