The EMEA region (Europe, Middle East and Africa) with its diversified economies offers attractive opportunities for investors. However, a close look is necessary to identify the potential of especially the Emerging Markets. Carmignac took a closer look at Eastern Europe and says that while the region is at the epicentre of the Russia-Ukraine war, there is potential within some countries. Hence, looking East to find attractive potential returns in European Bonds might be worthwhile.

Amongst the emerging markets with potential, Carmignac sees Hungary and Romania. As one beneficial factor the French asset manager names the reorder of supply chains in the region. The Ukrainian crisis has prompted some businesses in the European Union to relocate part of their production facilities in Eastern Europe. “In this new geopolitical order, some countries in the region, benefiting from this trend and boasting more solid fundamentals, offer attractive long-term opportunities, such as within the Hungarian and Romanian bond markets,” writes the French asset manager.

Carmignac believes Hungary’s relative solidity of its macroeconomic fundamentals makes it an attractive long-term issuer: “Its rigorous fiscal policy, which was tightened in 2022 to tackle its soaring deficit, has helped to keep a lid on its debt, minimising the risk of a payment default.”

In addition, Carmignac highlights that Hungary is actively working towards improving its environmental, social and governance (ESG) aspects. For instance, the country plans to close its last coal-fired plant in 2025, while investing in renewable energies.

Romania, on the other hand, is able to contain the direct economic impact of the war in Ukraine due to its diversified economy, varied natural gas supply sources and renewable energy production, as per the asset manager. “The country’s relative political stability, low public debt relative to its gross domestic product (GDP) and efforts to beef up its response to the environmental aspect of ESG criteria are all factors contributing to Romania’s attractiveness, particularly that of its external sovereign debt,” opines Carmignac.

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