Bangkok--11 Sep--Standard & Poor's
Since the beginning of the year, equity markets have made strong double-digit gains and credit default swap bond premiums have noticeably declined in the emerging markets. If the tone in the capital markets is any indication, the crisis in the emerging markets is already a distant memory--even though many economies will record a recession this year, said an article published today by Standard & Poor's.
From a corporate financing perspective, the worst might have past, but the road to recovery still presents some difficulties, according to the article, titled "Improving Investor Sentiment Puts Emerging Market Corporate Issuers In The Lead On A Tough Road To Credit Recovery (Premium)."
In the aggregate, emerging markets entered the global downturn this time around better positioned than they were in previous cycles. Corporate balance sheets were not as stretched, and coffers were bulging from commodity-based earnings and other export revenues. Nevertheless, as financial markets became gridlocked in the wake of Lehman Brothers' bankruptcy, contagion spread quickly to many markets that had until then remained unaffected. In particular, trade finance suffered a severe shock in the fourth quarter of 2008, causing trade volumes to plummet precipitously.
"The outlook for corporate credit quality in the emerging markets has regained some of its luster, in line with the improvement in the underlying fundamentals and the more optimistic tone in the capital markets," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Despite the upbeat signs, emerging market corporate issuers cannot be declared risk free. Interventionist measures have propelled the recovery so far, which creates some concern as to how successful emerging markets will be in managing the transition to a robust, private-sector-led recovery."
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760