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Europe's emerging markets most vulnerable to global credit squeeze - S&P
Almaty, April 23, 2008
Frankfurt-am-Main. Interfax-AFI - Eastern European sovereigns are the emerging markets' most vulnerable if the global credit squeeze tightens, Standard & Poor's Ratings Services has stated in a report released on Monday.
In a report titled, Why The Global Credit Squeeze Could Hit European Emerging Market Sovereigns Harder Than Others, S&P said the extent of vulnerability of each individual sovereign could relate directly to its degree of dependence on foreign capital inflows to finance external imbalances and avert balance-of-payments crises.
"We believe Eastern European sovereigns are the most exposed, while Asian and Latin American sovereigns, with their trade surpluses and large foreign exchange reserves, are generally better insulated against the dearth of financial flows that may be in store if the global economy declines more sharply," said S&P credit analyst Moritz Kraemer.
S&P's Liquidity Vulnerability Index (see table below) underlines this trend, showing that almost all of the most vulnerable countries are European, with only Lebanon and South Africa joining the group from beyond this region.
Iceland, an "honorary" member of the emerging market (EM) sovereigns for its strong correlation with general EM market conditions, tops the list of the most vulnerable, followed by Romania, Lebanon, and Turkey. Russia is the only European emerging sovereign that managed to squeeze into the “sheltered group".