These Are The Riskiest Emerging Markets

Tyler Durden's picture

Update: while this was initially posted yesterday, January 28, in light of what is happening this morning, it is prudent to revisit this topic.

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Now that EMs are fully in the public eye, Bank of America has updated its "most important external vulnerability indicators" table for emerging markets. The full table is below - it shows seven indicators for 55 emerging and frontier markets: four of them focus on the stocks of external assets and liabilities (FX reserves; net external position of the banking sector; net international investment position of the economy; and external debt/exports ratio) and three highlight the external funding risk (FX reserves/short-term debt ratio; current account balance; and basic balance = current account balance + FDI).

However for those who don't have the patience to pull all the numbers and compile a datatable, here is a chart which flags the highest external risk among the 10 most prominent EMs broken down by liquidity (reserves over near-term maturities) on the X-axis and capital flows (current account as % of GDP) on the Y-axis. It should come as no surprise, that Turkey is worst, followed by South Africa, India and Indonesia. China, Korea and Russia have current account surpluses and strong coverage of short-term debt by reserves. Brazil also has high reserve coverage of short-term debt. Mexico and Poland have small current account deficits and healthy reserve coverage, in addition to their IMF Flexible Credit Lines. As for Argentina, forgetabout it.


Full data:

Source: Bank of America