VanEck is a global investment manager with offices around the world. To help you find content that is suitable for your investment needs, please select your country and investor type.
Trends with Benefits is a podcast by VanEck with a forward-looking perspective. Host Ed Lopez interviews a guest each week to discover new ways of thinking about the markets, investing, work and life.
Stay current on VanEck’s latest news, press releases and important company information.
Find current notifications such as shareholder announcements and results of the shareholder meetings.
Find all the important investment goals as well as opportunities and risks in the SIDs of the VanEck ETFs.
Find general legal policies and procedures of VanEck such as the Remuneration Policy or Complaints Procedure.
Through forward-looking, intelligently designed active and ETF solutions, we offer value-added exposures to emerging industries, asset classes and markets as well as differentiated approaches to traditional strategies.
VanEck's investment teams offer active and passive strategies with compelling exposures supported by well-designed investment processes. The firm's capabilities range from core investment opportunities to more specialized exposures to enhance portfolio diversificaiton.
Search the latest job roles and career opportunities at VanEck. Apply today to join our growing European team.
Find the VanEck contact details for all European countries. If you have questions about our range of ETFs and mutual funds, please let us know.
The yield and spread pickup of emerging markets (EM) high yield corporate bonds and U.S high yield corporate bonds has widened above historical averages in recent weeks1. The overall average yield for EM high yield is now approximately 5.8%, versus 4.1% for the U.S. market, and the growing difference is driven largely by spread tightening that has occurred in the U.S. while the spread within emerging markets has remained flat year to date. It is probably not surprising, given recent headlines, that much of the recent EM underperformance has been driven by Chinese issuers.
The average spread for dollar denominated high yield bonds of Chinese issuers has widened significantly since the end of last year, driven by certain distressed names in the real estate sector. This sector has endured numerous attempts by the central government to limit leverage, the strictest of which were introduced last year with the “three red lines” test formulated by policymakers. Failure to adhere to these three leverage tests restricts access to additional financing, which has been critical to the growth of many of these companies. More recent regulatory actions by policymakers have not helped, including new steps to reduce speculation in residential real estate. Some heavily indebted property developers have defaulted this year, including China Fortune Land Development. China Evergrande, a very large and heavily indebted developer currently failing these tests, has seen its bonds punished by the market. On average, its U.S. dollar bonds that mature beyond next year are down 45%. Several other developers are also trading at distressed levels.
The silver lining is that the impact of these moves appears to be contained. Market declines in the Chinese real estate sector has not spread to other sectors within China, all of which have positive total returns year to date. Within real estate, lower rated names have been hit hardest. At a broader level, China is the only country among the ten largest by weights in the ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index to have experienced overall spread widening this year. For the EM debt market as a whole, lower rated bonds have outperformed, an indication that the volatility in China has not hurt risk appetites across the board.
Source: FactSet. Based on ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index. Option adjusted spread measures the difference in yield between a bond with an embedded option.
Regulatory risks have undoubtedly emerged in China, and investors across asset classes must continue to monitor developments. We also believe that capping country exposure is prudent from a risk management perspective, and overall China exposure is limited to 10% in the ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index. Whether current spread levels in the real estate sector represent value depends on developers’ ability to deleverage and adhere to requirements, as well as the potential for additional regulations. Real estate is indeed the largest sector exposure within the high yield China corporate universe, but we note that containment of the market impact aligns with the approach of policymakers, which has been deliberate and targeted. We also note that spread pickup versus U.S high yield at the index level, even when removing China’s contribution, is still above the historical average. Given the higher overall quality and stronger fundamentals of emerging markets high yield compared to U.S. high yield issuers, and the apparent containment of recent market moves to the Chinese real estate sector, we believe that emerging markets high yield corporates may continue to attract interest from income-seeking investors.
1Emerging markets high yield corporate bonds are represented throughout by the ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index, and U.S. high yield corporate bonds is represented by the ICE BofA US High Yield Index. Yield and spread as of 13/8/2021, and compared against 3, 5 and 10-year historical average of difference and yield or spread between Emerging markets high yield corporate bonds and U.S. high yield corporate bonds.
ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index tracks the performance of US dollar denominated below investment grade emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets.
ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed in this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
For informational and advertising purposes only.
This information originates from VanEck (Europe) GmbH which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin). The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.
All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH