BlackRock cools on emerging markets, favors euro government debt

Previously holding a small overweight position, BII has now moved to a neutral stance on emerging market equities. The institute noted potential opportunities in areas driven by AI infrastructure demand, particularly in Latin America. Similarly, emerging market hard-currency debt has also been downgraded to neutral from a small overweight, despite improved fundamentals, due to a less attractive risk-reward profile compared to other assets.

Conversely, BII has upgraded its position on emerging market local currency debt to a small overweight, citing attractive yields relative to volatility and improving fundamentals. The firm also enhanced its outlook on euro zone government bonds, moving from neutral to overweight. BII specifically favors short- and medium-term bonds, believing that markets are overpricing restrictive policy rates for the coming years.