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Schroders Talking Point: Emerging markets: Corporates at risk

  Author: Keith Wade ( Schroders )
 June, 2015
  Price: FREE

Abstract:

Emerging markets (EM) have been undergoing a renewed slowdown in the last 12 months, and this is true whether or not we include China. A falling income stream automatically raises some questions over whether payments can be met on existing debt. But there is an additional risk factor here: in many EM economies, growth post-crisis could not be achieved via exports to weak developed markets, and so credit was used to support growth. While debt-fuelled growth can be sustainable, questions start to be asked when borrowing grows faster than income. This is as true at the macro level as at the micro, and emerging markets have been borrowing beyond their means for some time.
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