Demystifying debt, distress and defaults across EMs: The MUFG Global Markets Podcast

Emerging markets are caught in the middle of a perfect storm. Indebted governments have spent capital they didn’t have to shore up healthcare systems against the pandemic. Then, the war in Ukraine turbocharged commodities, with central banks raising borrowing costs to quell inflation. To make matter worse, the Fed’s twin tightening – higher cost of funding and withdrawal of liquidity – alongside a lower gear in China, is biting, inhibiting capital flows with many investors retrenching from assets in emerging markets.

In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the state of affairs, and believes that the odds are rising for a wave of bond defaults, with nearly a quarter of emerging markets now trading at distressed levels.

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