The Economist Guide to Financial Markets by Marc Levinson

Author:Marc Levinson
Language: eng
Format: epub
Publisher: Profile
Published: 2018-07-19T16:00:00+00:00

Source: Bank for International Settlements

The growth of emerging-market issuance has been erratic owing to the financial and exchange-rate crises that have afflicted major borrowers. In 1994, for example, issuers from emerging countries sold $32.5 billion of debt in the international markets, but issuance fell to $22 billion the following year, after Mexico was forced to devalue its peso in December 1994. Some $72 billion was sold during 1997, but in 1998, as exchange-rate problems ravaged Thailand, South Korea, Russia and several other countries and threatened to spill over into Latin America, emerging-market debt issuance fell to $24.3 billion. The prices of these securities are often volatile as well, offering highly attractive returns for investors at some points and declining sharply at other times.

In early 2002, after Argentina effectively defaulted on its bonds and devalued its currency, Argentine government bonds were selling for as little as one-quarter of their face value. Emerging-market bond issuance was robust in 2011 and 2012 as extremely low interest rates in Europe, North America and Japan drove investors to purchase riskier securities in search of higher yields, but the emerging-market bond boom ended abruptly in mid-2013 as rising interest rates in the United States deterred many international borrowers. The main exception is China, which has become by far the largest emerging-market borrower, as shown in Table 6.4.

TABLE 6.4 Emerging-market issuers of debt securities, amount outstanding

$bn

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