Emerging markets face greater external debt

The currencies of emerging markets (EM) are down an average of 15 percent since the beginning of the year. The cost of repayment of loans EM denominated in foreign currencies such as the dollar and euro countries is likely to increase.

Richard Briggs and David Watts of CreditSights analyzed data on cross-border lending by the Bank for International Settlements and the data index for corporate bonds of Merrill Lynch to try to understand how big can be the external debt of developing markets.

First are the BIS data on cross-border lending, scaled against income in foreign currency of a country (exports). The figures ranged from 6 percent for South Korea to a staggering 56% for Brazil.

The following graphics are corporate bonds by BofAML hard currency, index of corporate bonds of emerging markets as a percentage of revenues in foreign currency. Brazil dominates again, with much of their foreign currency bonds, which were sold by energy companies.

Combining cross-border lending plus foreign corporate bonds denominated in foreign currencies will get a graph CreditSights, showing the total loans of the country.

Brazil is the otkroyavashtata be followed by Turkey and Colombia.

"This is not a nice chart, and unfortunately this is the real picture of foreign currency loans to emerging markets," noted analysts at CreditSights.

E.Dimitrov JrTrader