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Matthias Knab, Opalesque:

AB (AllianceBernstein L.P.) writes on Harvest Exchange:

Afraid you've missed the rally in emerging-market (EM) assets? Don't be. Responsible policies and pragmatic politics have taken hold in many developing countries. That bodes well for growth and suggests the rally has room to run.

EM bonds-both US-dollar and local-currency denominated-have produced strong returns over the last year. But some investors worry that rising interest rates in the US could lure money out of EM assets and put pressure on EM government and corporate balance sheets.

There was a time when that might have been so. But as we've pointed out in previous posts, EM countries as a group today are far less vulnerable to a capital outflow than they were a few years ago. A big reason for that is that many have reduced their external financing gaps. That has shored up local currencies, many of which stand to appreciate if the US dollar's recent weakness persists. At the same time, inflation is under control, thanks in part to firmer commodity prices, making inflation-adjusted real yields on EM bonds among the highest available.

Finally, governments across the developing world are embracing fiscally responsible policies and pragmatic politics. For example, lawmakers in Brazil have passed a cap on public spending and are on track to reform a blo......................

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