What lies ahead for emerging market debt in 2021, and where can investors find value? For Marcin Adamczyk and Bregje Roosenboom, the answer lies in divergence. The asset class should see a substantial growth recovery, but it will be unevenly spread across regions and time periods as countries follow different paths to normalization. This divergence is already visible, as emerging Asia has led the recovery so far while the high yield segment still appears undervalued relative to our projections.

In this environment, active management with a focus on fundamentals is key to locating opportunities. Countries that can best adjust to the new normal stand to benefit most from the growth recovery and the ongoing search for yield.