First Brands Collapse Shows EM Credit’s Edge, Africa Fund Says

Ninety One Plc CEO Hendrik Du Toit said at the Bloomberg Africa Business Summit in Johannesburg that credit quality in emerging markets is 'significantly higher' than in developed markets, arguing African and EM credit is resilient after long being starved of capital; by contrast he warned he is more worried about developed-market credit because it has been burdened with 'layers and layers' of leverage, suggesting relative opportunity and lower systemic risk in EM credit versus developed-market debt.

Analysis

At the inaugural Bloomberg Africa Business Summit in Johannesburg Ninety One Plc CEO Hendrik Du Toit said that credit quality in emerging markets is "significantly higher" than in developed markets and that African and EM credit has been "starved of capital" for a long time. He contrasted this with developed-market debt, where he is "worried" because there are "layers and layers" of credit on top of underlying assets, framing EM credit as relatively less levered and potentially undervalued.

The remarks imply a relative opportunity: capital-starved EM credit may attract inflows and experience spread compression if investor positioning shifts, consistent with the provided mildly positive sentiment label and market impact score of 0.28. For managers, the comment shifts emphasis toward issuer-level fundamentals and credit selection in EM, rather than broad exposure to developed-market credit where systemic layering of leverage is a concern.

Material risks remain idiosyncratic and market-structure driven; Ninety One’s statement does not remove heterogeneity across countries, sectors or individual issuers, so selectivity and rigorous credit analysis are required. Investors should monitor technicals and fund flows for signs of real capital movement into EM credit and watch for any contagion from developed-market stress that could reverse positioning quickly.

Key Decisions for Investors

• Consider increasing selective exposure to African and broader emerging-market credit that meets strict fundamental credit criteria, to capture potential spread compression as starved markets attract capital
• Reduce or hedge exposure to developed-market credit where leverage layers are a concern and prioritize credits with clear liquidity and balance-sheet resilience
• Monitor technicals, fund flows and sentiment/market impact signals (sentiment_score 0.28, market_impact_score 0.28) and implement liquidity and stop-loss parameters to limit spillover risk