The credit ratings agency Fitch has predicted that the greatest threats to corporations in the EMEA region are ongoing geopolitical tensions, especially in the Ukraine, and the risk of deflation.
In a report entitled 2015 Outlook: EMEA Corporates, Fitch said that deflation would reduce demand, increase debt burdens in real terms and cause asset values to fall, it said. B-rated issuers would be particularly badly affected.
While margins are improving across EMEA and corporates are generating more cash, helping to create stability in the region, rapidly increasing M&A activity could also prove to be a destabilising influence, depending on the prevalence of debt-backed, leveraged buyouts, said Fitch. One possible trend in this area may be a rise in local “bolt-on” acquisitions, particularly in telecoms, media and technology, pharmaceutical, oil and gas and capital goods.
Throughout 2015, market conditions are expected to improve, guiding the economy towards slow recovery. Companies across the region can expect to see a period of growth in revenues and profits, albeit an underwhelming one.
The biggest winners of the year, will be firms operating in the fields of construction, manufacturing, automobiles and other cyclical industries, said Fitch,
The architecture of financial markets has changed and we will soon see the end of the last eight years of prosperity, said Stefan Bielmeier, chief economist and head of research at DZ Bank.
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