Emerging Market Financing
The Emerging Market Financing quarterly ceased publication in November 2001. Both the EMF and the annual International Capital Markets Report (published since 1980) have been replaced by The Global Financial Stability Report. The new report was created to provide timely and comprehensive coverage of both mature and emerging financial markets as part of the IMF's stepped up tracking of financial markets.
Last Updated: May 1, 2002
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November 14, 2001 (pdf file 438kb): Events in September increased uncertainty and investor risk aversion at a time when concerns were already high about global slowing, emerging market fundamentals, and the potential for credit events in particular emerging markets. In the immediate aftermath of September 11, while the average cross-correlation of individual country returns in debt markets rose, in a broad-based sell off reflecting the generalized flight to quality, to levels last seen at the time of the Brazilian devaluation, it has fallen off since. The sell off in secondary markets was reflected in a drought in the primary dollar market, with most non-investment grade borrowers being unable to access the market since mid-August. With net private market financing for emerging markets in 2001 set for the worst year since the early 1990s, the baseline outlook for emerging market financing sees a durable improvement early next year as predicated on a turnaround in earnings and economic activity in the mature markets next year, and the dissipation of specific emerging market credit event concerns.
August 8, 2001 (pdf file 588kb): Against a backdrop of apparent global slowing, perceived emerging market fundamentals and credit quality continued to weaken, and average credit quality in the emerging debt markets fell back to its post Russian crisis lows. Though there were clear spillovers from emerging market countries where credit concerns heightened, the spillover remained contained to particular emerging markets, and overall emerging market financing held up relatively well during the second quarter. Measures of broad-based spillover or contagion across the emerging markets during the July turbulence remained well below levels seen in other major historical episodes of stress, as did overall market volatility. The baseline outlook for emerging market financing continues to see moderate bond financing flows, prospects for only very selective equity issuance, and syndicated lending continuing at its current pace, which remains well below that of last year.
May 10, 2001 (pdf file 680kb): Emerging market fundamentals weakened over the quarter, with average emerging market credit quality suffering its first notable setback since recovery from the Asian and Russian crises began. Spillovers to other emerging markets from Turkey and Argentina were, however, limited, and the increase in overall market volatility was relatively modest. The near record spike in January bond issuance helped boost the quarterly volume of bond issuance to its highest level since the post-Y2K boom. Sharp drop offs in international equity placements and syndicated lending, however, depressed overall fund raising over the quarter well below average 2000 levels. The baseline outlook for this year continues to see moderate bond financing flows, while the prospects for equity placements have diminished further. Syndicated loan markets are expected to remain supportive though the downside risks have risen.
February 13, 2001 (pdf file 660kb): Heightened expectations of a slowdown of the US economy, lowered earnings potential of the technology, media and telecom (TMT) sector, and a deterioration in US credit markets, all took their toll on emerging bond and equity markets in the last quarter of 2000. As emerging market spreads widened sharply, tighter external liquidity conditions focused investor attention intensely on prospects for the two largest emerging market borrowers on international bond markets-Argentina and Turkey. Despite an almost complete drying up of bond issuance, total emerging markets fundraising on international capital markets held up relatively well, supported by a robust syndicated loan market and a surge in equity placements from China. For the year as a whole, fundraising reached its second highest level, behind only the peak boom year of 1997. The outlook for emerging market assets and financing remains closely tied to developments in the external environment. Changing expectations of the relative probabilities of "soft" versus "hard" landing scenarios for the US are likely to keep markets volatile. The baseline outlook for 2001 is for a moderation in bond financing, selective equity placements, and a supportive loan market.
Third Quarter 2000 (pdf file 564kb): Reflecting expectations of a slowing US economy, higher oil prices, and a fall in the euro to a new low, the performance of emerging bond (up 5%) and equity (down 13%) markets diverged sharply during the third quarter. Though emerging markets fundraising on international capital markets continued to moderate in the third quarter, it held up relatively well as increased bond issuance, especially from smaller sovereigns and the corporate sector, offset declines in equity placements and syndicated lending. Beginning in September and intensifying in October, conditions for emerging market borrowers deteriorated: spreads widened across the board, and new bond issuance fell off sharply. The outlook is guarded and overall financing flows are expected to moderate further in the last quarter. As conditions on bond and equity markets remain choppy, issuers will continue to exploit windows of opportunity, while the syndicated loan market is expected to remain supportive.
Second Quarter 2000 (pdf file 505kb): On bond and equity markets, the performance of emerging market assets and fundraising were hostage to volatile conditions on international capital markets, with the adverse external environment dominating positive country fundamentals. Syndicated loan financing by contrast remained resilient, continuing to recover from the lows of the Asian crisis. Overall financing flows are expected to moderate in coming quarters, with a decisive decoupling of emerging from global markets unlikely until uncertainty about a soft versus a hard landing for the U.S. economy is resolved.