Netherlands-based investor NN Investment Partners said Thursday the search for yield will make emerging markets the most attractive destination for bond investors, but that South Korea was not likely to be their first choice.

“Although Korea is part of the emerging market universe in indices, it is much closer to the developed than many other emerging market universe,” Valentijn van Nieuwenhuijzen, chief investment officer of NNIP, said in a teleconference with Korean reporters.

“I think the upside (in bond issuance) is bigger in other parts of the emerging market indices than indices with Korean assets.”

The remark came as NNIP, managing 295 billion euros ($346 billion) in assets as of September, said its risk appetite for bonds in the emerging market and European high-yield bonds will grow to be larger with bond issuers focusing on balance sheet repair in 2021, unless a vaccine setback results in a fatigue from fiscal stimulus and faltering recovery. Over three-fourths of NNIP’s assets are allocated to fixed incomes.

“Our outlook for asset classes is one where we really prefer risky assets,” said van Nieuwenhuijzen, given that central banks of the US, Japan and Europe kept interest rates to a near-zero level and global tapering in the second quarter of 2021 is an unlikely scenario.

“There is more of an upside on the back of the profitability rebound, and risk premium will also be more attractive in emerging market, in Europe or in other parts of Asia. In credit space specifically, we really like high-yield market. Emerging market debt clearly offers attractive return prospect for 2021.”

According to van Nieuwenhuijzen, Korea is one of the most cyclically geared markets, making its equities more attractive, while its central bank is likely to maintain its accommodative policy stance to prop up consumption and fight the pandemic fallout.

Moreover, Korea is one of the emerging market countries along with China and Vietnam that stood out of the broader emerging market universe in terms of the handling of the national health crisis and the recovery of private consumption and investment, which led to a divergence of the speeds of economic recovery.

“(Korea is) obviously a clear candidate to benefit from global reflation,” van Nieuwenhuijzen said.

NNIP is an asset management subsidiary of NN Group, a parent company of Dutch insurance firm Nationale-Nederlanden.

By Son Ji-hyoung (consnow@heraldcorp.com)