Global Rate Hikes Raise Contagion Risk Beyond Emerging Markets. Here’s Where to Look. (Barron’s)

• The average sovereign spread of the 15 largest frontier economies has soared to a distressed level of 1000 basis points over U.S. Treasuries, notes Gavekal analyst Victor Tsui in a note to clients. A strong dollar makes it harder for indebted countries to finance their liabilities since their own currencies are worth less—and that in turn can hit confidence in their ability to repay their debt thereby adding even more pressure on their currency—what Tsui describes as a “self-reinforcing downward spiral.” While these countries aren’t heavily represented in equity investors’ portfolios, Tsui notes they make up almost a fifth of the JP Morgan EMBI global diversified index, creating “a sizable risk of contagion” to the broader emerging market debt ecosystem if stresses rise further. READ MORE

Similar Posts:

• In Emerging Markets, the Bulls are Back Again (Globe and Mail)
• Morgan Stanley: Emerging Market Pillars Seem to be Crumbling
• Petróleos de Venezuela (Pdvsa) Now Verges on Collapse (NYT)
• What Makes Emerging Market Debt Tick? (CFA Institute)
• Moody’s Downgrades China’s But Changes Outlook to Stable From Negative (Moody’s)
• Emerging Market Companies & Governments Binge on US Dollar Debt (WSJ)
• Emerging Markets: A World of Opportunity (Nuveen)
• Emerging Market Closed-End Funds List
• Emerging Market Debt Outlook 2018: A Global Rebalancing is Due (Vontobel)
• Rplan Survey: Investors Have Been “Taken In” by Emerging Market Hype
• Investing in the Changing Shape of Emerging Markets (Amundi Research)
• Ashmore Investment Management: Aggressive Western Foreign Policy Threatens Emerging Market Progress (funds europe)
• Capitalizing on Currencies to Boost Emerging Market Returns (Pictet Asset Management)
• Emerging Market Links + The Week Ahead (September 26, 2022)
• Evaluating Emerging Market Stocks through a Governance Lens (MSCI)