Bangkok--6 Sep--Standard & Poor's
Volatility and risk aversion have dissipated in emerging markets after a brief outbreak earlier this year, but they wreaked enough damage for bond investors to adopt a more cautious and nuanced approach, says a report published today.
In the report, titled, "Emerging Market Bonds: Cause For Pause," Diane Vazza, Managing Director, Standard & Poor's Global Fixed Income Research, also says, "The sheer diversity of this segment and solid long-term prospects lend this asset class a resilience that is increasingly harder for more groups of investors to overlook."
The article is part of a special report on emerging markets published on RatingsDirect, the real-time, Web-based source for Standard & Poor's credit ratings, research, and risk analysis, and in the Sept. 13, 2006, issue of Standard & Poor's CreditWeek.
Other points made by Ms. Vazza in her analysis include:
-- After three years of a stupendous rally, emerging-market debt is now expensive, and additional gains beyond the mid-single-digit range will be challenging.
-- Credit quality among emerging market entities depicts a strong but cautionary picture, with 61 upgrades and only 19 downgrades in the year-to-date ended Aug. 25.
-- The downgrade ratio of 24% in the year remains much lower than the 83%, 66%, and 47% recorded in the first three years of the millennium but higher than the 14% in each of the last two years.
-- A sustained policy of monetary tightening across the world's major central banks is likely to sap the liquidity growth that has fueled the rally, with concomitant pressures on emerging market securities.
In its special report on emerging market economies, Standard & Poor's Ratings Services concludes that the monikers "emerging market" and "developing country" may need to be updated or, in some cases, entirely eliminated given what appears to be sustainable economic growth in many of the world's poorer countries, particularly in their private sectors. The developing countries together now account for two-thirds of world economic growth. Overall, Asian countries are the leaders, but many non-Asian economies are also booming.
In advance of this year's annual meeting of the World Bank and International Monetary Fund in Singapore, Standard & Poor's asked 16 of its senior economists and credit and index analysts to examine the broad emerging market landscape, including the roles that government regulations on investment, public/private partnerships, structured finance, and project financing are playing to boost GDP development. For more information and video commentary by the authors, visit Standard & Poor's Web site at www.standardandpoors.com
The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com . If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected] . Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com ; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054
[email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760