(Bloomberg) — Bond managers are lukewarm about Asian debt on the belief that the region will be the last of the emerging markets to start raising rates.

Fidelity International Ltd. and abrdn Plc are among firms shunning Asian local debt and favoring bonds elsewhere in the developing world, believing the region will take longer to start tightening monetary policy. Meanwhile, central banks in several Latin American countries are ahead of the curve, paving the way for a recovery in the region’s debt.

“We expect central banks in EMEA and Latin America to complete their monetary policy tightening cycles ahead of Asia,” said Paul Greer, London-based fund manager at Fidelity. “So we generally avoid Asian local bonds and see more value in other regions.”

Most Asian local bonds have fallen so far this year, while South Africa, Brazil, Chile and Turkey have posted the largest gains among developing countries, even as the Federal Reserve prepares to raise rates. While policymakers in Latin America and Europe spearheaded the tightening cycle in emerging markets, rates were kept at a standstill in most of Asia, with China even easing his policy in January.

“The juice has to be gotten in LatAm and EMEA,” said Edwin Gutierrez, head of emerging markets sovereign debt at abrdn in London, who likes debt from Chile, South Africa and Brazil. “Asia is just starting to see a pick-up in inflation as countries move away from zero-Covid policies.”

Of course, there is a risk of downward pressure on emerging local bonds from hawkish policymakers in major economies. The European Central Bank is no longer ruling out an interest rate hike this year, while the Fed is expected to embark on a tightening cycle in March.

Still, “effective yields are expected to maintain their premium to U.S. Treasuries in most developing economies,” Damian Sassower, chief credit strategist for emerging markets at Bloomberg Intelligence, said in a Jan. 27 report. .

While most of Asia’s central banks are only expected to raise in the third quarter, Brazil, which has raised interest rates by 8.75 percentage points since last year, will likely lower its policy rates by by the first quarter of 2023, according to a Bloomberg survey. Russia could start to ease as early as the third quarter, although the outlook is clouded by rising geopolitical risks.

“In countries like Russia, the Czech Republic, Brazil and Chile, the tightening will be completed in the first half of this year,” said Julio Callegari, senior portfolio manager at JPMorgan Asset Management in Hong Kong.

So far this year, Indonesia and Malaysia have kept rates unchanged, unlike peers like Hungary and Chile, which surprised with a whopping 150 basis points in rate hikes. Brazil signaled that the world’s most aggressive monetary tightening cycle was coming to an end last week after cutting borrowing costs above 10% for the first time in nearly five years. In Asia, South Korea, Pakistan and Sri Lanka raised their rates.

The prospect of early rate cuts in Brazil and Russia is helping attract funds like Fidelity, which said it sees attractive value in the nations’ bonds. The fund also prefers debt in Mexico and South Africa, Greer said.

Here are some of the major events and data to watch in emerging markets this week:

• Slovenia and El Salvador are due to release consumer price data for January on Monday.
• Russia is expected to release a January inflation reading on Wednesday. The Bank of Russia appears ready on Friday to tighten monetary policy further to contain a sustained surge in inflation, according to Bloomberg Economics.
• Chile will publish its trade balance and copper exports on Monday
• Brazil will release inflation and retail sales data on Tuesday and an economic activity index, a gauge of GDP growth, on Friday.
• Mexico is expected to raise interest rates by half a point on Thursday.
• The Czech Republic will release retail sales data for December on Tuesday.

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