According to analysis by JPMorgan Asset Management, Colombia and Mexico have replaced India and Brazil as members of the “fragile five” group of emerging market nations. The two countries, alongside Turkey, South Africa and Indonesia, are seen as the most overdependent on potentially skittish foreign investment flows.
Colombia has plummeted in the rankings as a result of its heavy dependence on oil exports, particularly for government revenues, and chunky current account deficit of 5.8%, which needs to be funded by capital inflows.
Mexico is seen as vulnerable because its reserve coverage ratio (its foreign exchange reserves divided by its funding gap which is the capital needed to balance its current account deficit, repay short-term funding and compensate for any drying up of foreign direct investment) is just 1.6 years. This is far less than the seven years for struggling oil exporter Russia. In addition, Mexico’s problems is exacerbated by its real interest rate of close to zero, leaving little flexibility to cut rates if its economy weakens further.
To read the whole article, Mexico and Colombia join ‘fragile five’ emerging markets, go to the website of the Financial Times. In addition, check out our Colombia ADR and ETF lists as will as our Mexico ADR and ETF lists.
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