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M&G’s Riddell: EM debt is not a safe haven

M&G bond manager Mike Riddell says emerging markets are not a safe haven from the developed world.

Riddell, who runs the £74m M&G international sovereign bond and the £374m M&G index linked bond, says that he does not see emerging market debt as a good alternative to developed market debt.

He says: “There is a view that emerging markets are a safe haven from developed market woes. This narrative on emerging markets is “dangerous”. It is one you heard a lot last summer and people realised it is completely rubbish.”  

Riddell warns that he expects a risk-off period to come following continued problems with the eurozone and says it is not a good time to own emerging market debt.

He says: “The bubble already looks like it is bursting in China. China GDP growth may be 9 or 10 per cent per year, which was sustainable in the 1990s , but it is not sustainable anymore.”

Riddell says that China should be growing at a long-term sustainable growth rate of 5 to 6 per cent per annum.

He says: “The Chinese government has been able to hit these elevated and unsustainable target growth rates via the credit bubble. There has been enormous credit growth.”

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