 2021 turned out to be a turbulent year, with the recovery from COVID-19interlaced with higher rates (manageable), politics/policy-induced volatilityin some sovereigns (limited impact on corporates), and meltdown in ChinaHY property (drag on performance but limited repercussions ex-China).CEMBI Broad spread widened +26bp YTD to 284bp, but this is entirely due tothe drag from China. Indeed, excluding China, the spread is -14bp at 252bp.Total returns were still more resilient than other EM fixed income and US HG.

 We see EM corporate spreads tightening in 2022, with a positive return of+1.7%. The main 2021 headwind from China HY property may contributepositively in 2022, as the year of the tiger starts in a crouching position, but isultimately able to spring up into a recovery and realize the hidden returns. Weexpect headline CEMBI Broad spreads to tighten from current level of 284bp to240bp (-45bp), mainly driven by the stabilization in China HY property whileex-China tracks US credit. However, default adjustments mean only part of thespread compression contributes to returns.