Save time by listening to our audio articles as you multitaskBig firms in these countries are a different story. Debt issued by large companies has risen relentlessly since the turn of the millennium—from just over 60% of emerging-marketin 2000 to more than 90% on the eve of the covid-19 pandemic—as firms took advantage of low interest rates. Borrowing then jumped a further ten percentage points in 2020 alone. Much of this money is owed to foreigners.
According to JPMorgan Chase, a bank, the default rate for emerging-market issuers of high-yield corporate debt has jumped to 11.4% this year, well above the 1.7% notched in 2019 and the long-term average of 3.7%. Higher rates and an expensive dollar are only partly to blame. Troubles have been concentrated in China, where property-market woes have kept default rates in the sector at double-digit levels for two consecutive years, as well as in Russia and Ukraine.
It is problems elsewhere that look more troubling. Rising rates and slowing growth have taken a toll on property markets around the world, and this is now creating difficulties for firms outside China as well as within. A default, in late September, on short-term debt issued by the developer of Legoland Korea has thrown debt markets in South Korea into turmoil. Yields on short-term debt have shot up to the highest levels since the global financial crisis of 2007-09.
In recent weeks, property troubles have also popped up in other emerging Asian economies. Liquidity has evaporated from Vietnamese corporate-bond markets, following an effort by officials to rein in corruption in the country’s property market. As prices for developers’ shares and bonds tumble, the central bank is weighing intervention to keep the market functioning. Indonesian developers face similar difficulties.
This spreading financial unease may seem reminiscent of past panics, including the devastating crisis that ripped across Asian economies in 1997 and 1998. There are, though, good reasons to hope trouble will be contained. Rising rates have hurt property markets, but most big firms pay fixed coupons on their bonds and have not issued much new debt over the past year. Governments across Asia have fiscal room to support their economies and hefty piles of foreign-exchange reserves.
Can't have them inconvenienced. Your core readers. Avid for a profit. At someone's expense.
the market is dead, the troubles are just beginning 🥸🙃
The 'debt' is incurred by printing worthless currency! No other reason!