Emerging-market debt looks like one of the most attractive sources of yield today, BlackRock Global Chief Investment Strategist Richard Turnill said Monday.
Investors last week poured the most cash into global equity funds since October and the second highest amount ever into emerging-market bond funds, Bank of America/Merrill Lynch said Friday.
The market response to the
Turnill sees three emerging-market headwinds transforming into tailwinds.
The Federal Reserve looks poised to keep interest rates lower for longer, leaving investors searching for yield in riskier developing nations. Commodity prices, particularly the cost of crude oil, appear to be stabilizing, easing the pain for resource-dependent emerging nations. And while remaining a risk, Chinese growth appears to be on a more stable path.
"Put that together with yields still in mid- to high-single digits across EMD [emerging-market debt], we think there's potential for emerging-market debt to go further," Turnill told CNBC's "Squawk on the Street."
As for developed markets, Turnill said the announcement by Japanese telecom multinational Softbank that it will purchase U.K. semiconductor giant ARM Holdings in a deal worth more than $32 billion shows Britain remains one of the most attractive markets in terms of long-term investment.
That is despite BlackRock's view that Britain is likely to fall into recession in the next 12 months, which will likely be led by investment spending, particularly in the real estate market, Turnill said.
However, likely lower interest rates and a weak pound will cushion the impact of economic contraction, particularly for British exporters, according to Turnill. Slices of the U.K. stock market with exposure to exporters could benefit, he added.
"U.K. recession does not mean necessarily mean a bear market for U.K. stocks," he said.
— Reuters contributed to this story.