Inflation and interest rate differentials favouring emerging markets

Long-term prospects for emerging markets look promising, but a more challenging global backdrop and ongoing inflation pressures argue for continued caution, according to European market participants

European fixed income investors look to the currencies of economies with strong growth and high yields

European private banks that are finding it difficult to extract value from the market and construct appealing coupons are looking to target specific stocks and baskets of emerging markets indexes instead of individual benchmarks.

“Current low interest rates mean the discount is relatively limited and investors are left with very little to purchase exposure to growth options,” says David Rumsey, head of product specialists at HSBC Private Bank in London.

But while higher interest rates are now