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Emerging Markets: Credit concerns escalate
Fri, Aug 10 2007, 11:53 GMT
by Lars Christensen
Turmoil continues in the global financial markets and the impact is being clearly felt in Emerging Markets. Hardest hit are the “usual suspects” - Turkey, South Africa, Iceland, Hungary, Indonesia and the Philippines. The situation is very uncertain and the markets are very, very nervous.
If credit concerns escalate further, we would expect especially those Emerging Markets with large external debts and deficits to come under additional pressure: for example, Turkey, South Africa, Hungary and Ice-land, as all these countries are struggling with substantial external imbalances. Furthermore, Central and Eastern European markets in general are vulnerable, as most countries in the region run large current ac-count deficits. External imbalances are largest in the Baltic countries, Bulgaria and Romania.
Concluding, extreme caution is warranted in the present circumstances. We would stress that we continue to see the global economy as fairly strong, and this should be supportive for Emerging Markets. However, if the credit situation worsens further, obviously this might not be enough to protect Emerging Markets from further major setbacks.
In the Emerging Markets’ universe, the safe-havens would be the Emerging Market countries with the strongest external balances and least funding needs - in other words primarily the Asian Emerging Markets and the CIS countries.
Published on Fri, Aug 10 2007, 11:51 GMT
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