Let’s say, for argument’s sake, that you’re a big company in an emerging market and suddenly, a commodities crash for the ages and a "surprise" devaluation by the world’s engine for global growth and trade sends your country’s currency into a veritable tailspin.
If that were the case, just about the worst possible situation you could find yourself in would go something like this (adapted from Bloomberg [4]): "Eighty-five percent of [your] backlog is denominated in the [home currency], which plunged to a record low this week [and] almost half of [your] debt is in foreign currencies, mostly dollars."
[5]
Well, that’s precisely what the situation looks like for Mexico’s largest construction company Empresas ICA SAB which spooked bond investors earlier this month by selling a key 3% stake in an airport operator for $56 million in order to pay down debt.
That has sparked liquidity worries and as you can see from the following, investors are slightly concerned.
[6]
As Bloomberg notes [4], this is the "hardest hit bond in emerging markets" and it should serve as a poignant reminder of just how bad it is out there for the world’s emerging economies.
