Why emerging markets are still emerging
Emerging-market countries will enter new territory next year. For the first time since the asset class was established in the late 1980s, these nations will become net creditors in the global economy, according to data from Fitch Ratings.
At a time when the US has a record current account deficit, one-third of the 68 emerging-market countries rated by the agency are already net external public creditors. This has been largely spurred by higher commodity prices, especially for oil, a build-up in foreign exchange reserves and better macroeconomic management.
The data is the latest to show that the asset class is at its healthiest for a number of years. Credit fundamentals, for example, have improved to the point where more than 40% of Fitch-rated emerging markets now enjoy investment-grade status. Three-quarters have an international liquidity ratio of at least 100%.
Is this, then, the start of a new era? Have emerging markets finally matured? Is the term becoming irrelevant, even redundant?
The short answer to all the questions is no. Cynics are still not convinced that the asset class is benefiting from anything more than an upturn in commodity prices and market liquidity.