Bangkok--4 Oct--Standard & Poor's Companies in the emerging markets face navigational challenges in a heightened risk environment, according to an article published today by Standard & Poor's. The report, titled "Emerging Markets Credit Quality: Tackling Volatility From A Position Of Strength," said that emerging markets have myriad reasons to be cautious about the reverberations stemming from the housing-related fallout in the U.S., as well as the recent illiquidity in the short-term lending markets in the U.S. and Europe. "Market indicators suggest a definitive turn for the worse in the global credit cycle, exemplified by the widening movements in volatility as well as corporate bond spreads and credit default swap premiums," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Yet, emerging markets approach this bout of renewed financial volatility from a position of substantively greater strength than they had in previous rounds of instability, such as the Asian financial crisis in 1996-1997. The long-term outlook for corporate credit quality in the emerging markets remains sound, notwithstanding a sharp increase in near-term credit-market instability. The sheer diversity of this segment and solid long-term prospects suggest that investors will find it hard to overlook this asset class, even in the aftermath of a near-term sell off." The article notes that the macroeconomic backdrop for emerging markets remains solid after several years of balanced, robust growth. The terms of trade on offer have worked in favor of companies in the emerging markets, boosting export performance worldwide and fattening current account surpluses across all major regions in the emerging markets. Since the Asian financial crisis in 1996-1997, emerging markets have made great strides in reducing structural barriers to growth (such as regulation), implementing prudent debt management policies and reducing indebtedness, and adopting flexible currency policies. These changes have supplemented emerging markets' ability to attract investors during the previously benevolent conditions in the global credit markets. Ms. Vazza added with respect to emerging markets risks that, "A tangible slowdown in the U.S. is already in place, and rising recession risks could hurt exports from emerging markets, compromising one of the key growth factors in recent years. Moreover, the boom in liquidity and the low spreads on offer have accelerated credit growth in some emerging markets, in turn generating some vulnerabilities in terms of inflation, exchange-rate appreciation, and export competitiveness. And, persistent financial volatility and an uncertain pricing environment may materially detract investors from seeking assets from emerging markets." This article is part of a special report, "Emerging Markets Credit Quality Resilient, But Caution Is Warranted." The special report will be available on RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, and for an upcoming special issue of Standard & Poor's CreditWeek. 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.