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JP Morgan launches first fixed income frontier markets index


JP Morgan has introduced the first fixed income Next Generation markets index, which tracks dollar-denominated government bonds issued by frontier markets. The new index, JP Morgan Next Generation Markets Index (NEXGEM), is a fixed-income benchmark that provides exposure to non-investment grade rated, smaller, less liquid population of emerging market economies.

“Growing demand for exposure to Next Generation markets is part of the expansion and deepening of the emerging markets debt asset class. The focus on Next Generation markets is expected to continue as investors seek diversification and higher yields. With NEXGEM℠ we will provide investors with a well-defined and diligently-managed benchmark for these markets within the emerging markets framework,” says Gloria Kim, JP Morgan’s Head of Global Index Research. “It continues a legacy of premier index products developed by J.P. Morgan and underscores the firm’s dedication to developing emerging markets.”

NEXGEM closely follows the methodology of JP Morgan’s EMBI Global Diversified, which is the most widely used benchmark for investors in dollar-denominated emerging market government bonds. NEXGEM selects countries from this benchmark that meet our criteria for Next Generation Markets. Today, NEXGEM includes 18 countries representing Sub-Saharan Africa, Central American, the Caribbean, Middle East, Europe and Asia: Belarus, Belize, Dominican Republic, Ecuador, Egypt, El Salvador, Gabon, Georgia, Ghana, Iraq, Ivory Coast, Jamaica, Jordan, Nigeria, Pakistan, Senegal, Sri Lanka, and Vietnam. Allocation to Next Generation markets will likely increase as investors seek diversification and higher yields. NEXGEM℠ serves as a tracker for these markets.

“Next Generation emerging markets will continue to gain investor interest due to high yield and continued growth momentum,” says Joyce Chang, Global Head of Emerging Markets and Credit Research, said. “We believe that NEXGEM countries have the potential to outperform the EMBI Global Diversified next year, delivering double-digit returns on the back of the current high yield of 8% for NEXGEM countries, stronger growth prospects compared to core EM and DM economies, and supportive technicals on the back of light investor positioning.”

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