...and how to fix it
Coverage of the unfolding crisis
Russia’s muscular posture on the Crimean region of Ukraine, re-awakening Cold War tensions, threatens to tip the economy into a mild recession and has put a spotlight on the country’s structural weaknesses amid political risk, say analysts.
Published March 2014 euromoney.com
While OTP and Raiffeisen are vulnerable to FX losses and a slowdown in Russia and Ukraine, the impact should be manageable, though there are some exceptions.
The roller coaster in emerging markets threatens one of the few consistent bright spots for investment banks since the global financial crisis. If the rout spreads, they could be faced with a sharp decline in FICC trading and a collapse in deal flow. But bankers remain remarkably sanguine. Could this be the sell-off that finally proves the EM asset class has come of age?
Euromoney March 2014
The scale of Ukraine’s challenge to correct economic balances is staggering, even if a political consensus is reached that would see an IMF support package. What’s more, markets might be understating sovereign default risk given strict debt covenants in the 2015 Russian-backed dollar bond that is sure to be used in a regional chess game, say analysts.
Published February 2014 euromoney.com
Although market players discern substantial differences between the fragile-five economies – notably in their current-account profiles – they remain, as a group, especially vulnerable to domestic and international market shocks, says bearish analysts.
A shock policy-driven fall in the onshore spot rate has ignited speculation that a widening of the exchange-rate band is on the cards, while others are unsure the 'two-way' volatility presages a structural shift.
After braving the exodus of retail and crossover investors, embattled bourses in emerging markets (EMs) have faced a new challenge in recent months: outflows from family offices. However, the prospects for EM debt allocations look relatively brighter this year, say analysts.
Nigerian central bank independence passed away this week, according to traders, after a long battle with government officials that culminated in the downfall of the celebrated reformer Lamido Sanusi.
Banking-sector risk in Europe has almost halved since its peak in the summer of 2012, thanks to a wave of deleveraging, according to the latest projections from a systemic risk index, Euromoney can reveal. However, banking-sector leverage in France and Italy remains a source of systemic risk, while Greece and Ukraine are bright spots, according to the index.
South Africa’s finance minister Pravin Gordhan added his voice to the growing chorus of Bric policymakers sounding the alarm over the negative spillover effects of US monetary policy.
Global current-account rebalancing and exchange-rate misalignments account for the emerging-market rout, according to the Keynesian school of thought that looks at monetary trends and flow of funds.
Published January 2014 euromoney.com
Pool of large unrated firms set to grow; Uphill battle to establish market share
Euromoney February 2014
The Fed added insult to emerging-market injury when it failed to acknowledge the EM rout this week, confirming the resolutely domestic focus of its monetary stance despite the international spill-over effects. The move reignites the debate about global monetary co-ordination.
Not all emerging markets are in free fall, investors are discriminating between surplus and deficit countries, it’s not all China’s fault, and domestic EM policies matter.
Emerging-market assets have fallen thanks to domestic policy risks, rather than Fed-tapering fears, triggering market contagion, as Turkey and Argentina lurched into crisis mode. However, India’s economic rebalancing shows the way forward for EMs out-of-market favour.
A massive currency sell-off this week echoes the dark days of emerging-market crises, say bears. Analysts are resolutely underweight emerging market bonds and stocks, citing the legacy of the recent credit boom and the absence of structural reforms.
Regulators have woken up to the currency’s potentially huge impact on the global payments system, given the decentralized, virtual and anonymous nature of the peer-to-peer network.
EP chair presses on with regulatory proposals; seeks parliament’s oversight of ECB.
Euromoney January 2014
The investigation by the European Securities and Markets Authority (ESMA), uncovering alleged flaws in the sovereign-ratings process, could presage a more intrusive supervisory regime, rekindling the debate about their role in global financial markets.
Published December 2013 euromoney.com
Everything you thought you knew about the ECB’s comprehensive assessment was wrong – it won’t reveal large holes in banks’ balance sheets.
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