PI: Are governance standards in emerging markets improving? Deltcheva: Definitely. Think of all the Eastern European countries that are part of the European Union. They have to adopt laws and regulations, so if they want to issue debt they have to expose themselves to higher transparency standards. I don’t know of many countries that have not built or are building relationships with the World Bank or IMF, which includes conforming with higher data dissemination and data quality standards, in the 15 years I have been involved with emerging market debt. There is a definite improvement in the data being published; even small countries are catching up. To get market access you need a certain level of credibility and data standards otherwise you do not attract the investment. The emerging market debt universe has expanded quite substantially, not only in the sovereign space but for corporates as well with more than 600 companies. It is challenging to follow Chinese companies due to limited disclosure and transparency issues. More companies have set up access through Hong Kong and Singapore as well as in China itself, which will probably get this grey area to improve. We have better data and we have better compliance. You should not allow stories like Turkey or Russia meddling in international affairs to cloud the emerging market debt asset class’ structural improvements over the past few years. Willsher: My understanding is that supply is generally down. The story we have been talking about today is positive, but if supply doesn’t change then it’s not as good a story as it might otherwise be. Deltcheva: To me governance improvements are correlated with basic structural reforms, GDP per capita growth, the pace and extent of a country’s productivity improvements that drive risk premium. Improving social and governance indicators allow countries to not only issue sovereign but quasi-sov- ereign corporate debt, so that improvement usually means more supply. Structural reforms take time though. It doesn’t happen in a year or two. Mordezki: There is a technical issue on the corporate side, specifically in Latin America. Bonds net sup- ply: if you compare gross i ssuance with internally generated cash-flows – coupons, amortisations, calls


June–July 2019 portfolio institutional roundtable: Emerging market debt 19


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