07-22-2016, 01:41 AM
Nobody seems to be paying attention to the underlying fundamentals..
EMs have found themselves in favor again after a wobbly 2015. For the week ending July 15, EMs attracted the strongest level of portfolio inflows since September 2013, the Institute of International Finance (IIF) noted on Wednesday. Financial institutions, including BlackRock and Bank of America Merrill Lynch, have struck a bullish note on EM equity and credit markets, citing the sector's high yields and support from easy monetary policy. But that resilience may not last long. Moody's warned on Thursday that debt is now growing faster than gross domestic product (GDP) for many EM economies, making them vulnerable to external shocks.
Asia emerging markets lead debt growth globally, Moody's warns
Private debt is to blame, according to the ratings agency. Since 2005, private sector external debt has grown at an annual rate of 14.3 percent compared to 5.9 percent growth rate for public sector debt." Asia-Pacific was leading the credit build-up, with debt levels rising at an average rate of 13.5 percent a year—more than any other EM region. China, India, Indonesia, Taiwan and Malaysia were the particularly worrisome countries in the region, Moody's said.
Asia emerging markets lead debt growth globally, Moody's warns