Economies and credit markets have been awash with liquidity to keep them afloat through the pandemic, which may now be receding into the horizon. In 2022, a rising rate environment is likely to be a challenge, as ramped-up fiscal deficits become costlier to fund and favourable trade balances start to erode. In addition, the unintended consequences of China’s growth path may be its impact on other emerging markets. We expect there to be dispersion in emerging market outcomes in 2022 and the depth of the asset class – 826 issuers across 59 countries3 – offers the potential for investors to capture diversification benefits while mitigating risks. At the same time, the opportunity in China could easily be overlooked and credit selection is critical to distinguish those companies with strong fundamentals, such as access to capital and ample liquidity, to navigate through choppy waters.






Source: J.P. Morgan, ‘EM Corporate default monitor’, 8 November 2021; default rates are par weighted and exclude 100% quasi-sovereign issuers.


Source: Goldman Sachs Economics Research, ‘China Data Insights: How big is China’s property sector’, October 2021.


As represented by the J.P. Morgan Corporate Emerging Market Bond Broad Diversified Index as at 31 October 2021.






Monetary policy: Central bank policies aimed at influencing the level of inflation and growth in an economy. It includes controlling interest rates and the supply of money. Monetary stimulus refers to a central bank increasing the supply of money and lowering borrowing costs. Monetary tightening refers to central bank activity aimed at curbing inflation and slowing down growth in the economy by raising interest rates and reducing the supply of money.


Liquidity: The ability to buy or sell a particular security or asset in the market. Assets that can be easily traded in the market (without causing a major price move) are referred to as ‘liquid’.