The index is a global, liquid corporate emerging markets benchmark that tracks U.S.-denominated corporate bonds issued by emerging markets entities. According to a press release, the CEMBI is the first in a series of corporate emerging markets indices JPMorgan plans to introduce.
First Hybrid Index
The launch also includes the first hybrid index in the JPMorgan emerging markets fixed income family – the CEMBI HYBRID, which integrates corporates and sovereigns. The CEMBI HYBRID will incorporate the newly created CEMBI and the widely used EMBI Global.
The corporate CEMBI is a liquid basket of emerging markets corporate issues which include approximately 80 bonds, representing 60 issuers and 16 countries (as of October 31, 2007). The CEMBI has strict liquidity criteria for inclusion in order to provide replicability, tradability, robust pricing and data integrity, according to the firm.
The CEMBI BROAD, which JPMorgan plans to launch in coming months, will be more comprehensive and will include smaller issues to cover a wider array of corporate bonds. The minimum amount outstanding required will likely be $350 million for the CEMBI BROAD compared to $500 million for the replicable and tradable CEMBI. There will also be a diversified version for both series to provide a well-distributed, more balanced weightings for countries included in the index.
According to the firm, a key feature of the CEMBI is the liquidity of the underlying basket. The CEMBI will allow JPMorgan to provide a full range of tradeable products, starting with total return swaps and funded certificates. JPMorgan’s market-making on the CEMBI will be a tool for investors to take directional views or implement relative value strategies in the emerging markets corporate space.
Annual external debt issuance from emerging market corporates has risen from $21 billion in 2002 to $115 billion in 2006 and has already exceeded $140 billion this year, according to the firm.
Daily historical index levels and statistics are available going back to December 31, 2001. Clients and investors can access index levels and statistics for the CEMBI on JPMorgan’s client-only research website, www.morganmarkets.com
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