Emerging Market Debt Issuance Hits Near-Record High – Report

New issue activity among emerging market financial and non-financial corporates surged to a near historical record in 2003, but its ability to maintain this ‘dizzy pace’ in the current year hinges critically on several positive external developments being replayed, according to a report by Standard & Poor’s. Even though global demand for emerging market bond issues has been extremely positive in first-quarter 2004, a number of recent adverse geopolitical events – the attempted assassination in Taiwan, presidential impeachment in South Korea, and renewed tension in the Middle East following the assassination of the Hamas leader – have already caused consternation. ‘Looking ahead, emerging market issuers will continue to take advantage of an attractive funding environment which is facilitated by central banks in key regions maintaining an accommodative stance,’ observed Diane Vazza, head of Standard & Poor’s Fixed Income Research Group.’ However, the sharp run up in commodity prices-whose trend is generally positively correlated with emerging market issuance – to unprecedented highs since 1990 magnifies the risk that gains may be more circumspect in the coming months. Any hiccups in the global growth outlook – especially in Europe where weakness is already manifest-or an unexpected acceleration in interest rates in the U.S. could impede capital flows to the emerging markets and constrain financing prospects, particularly for weaker rated borrowers,’ Vazza added.


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