Our credit view of Argentina reflects its large and relatively wealthy economy against rising policy uncertainty and the risk it poses for increased financing pressures and eroding buffers.
In a new cross-sector report we study the effects of corruption, commodity prices and portfolio flows, technological disruption, and skills gaps on Latin America’s business, finance and macro-economic conditions.
The latest developments are a further illustration of the erosion of the central bank's independence in terms of setting monetary policy and also the country's institutional strength.
The average covenant quality (CQ) score for Asian high-yield bonds in the second quarter of 2019 was 3.26 (moderate ↓)
The wave of mergers and acquisitions (M&A) sweeping through sub-Sarahan Africa's (SSA) banking markets is credit positive for SSA bank creditors. We expect the drivers of consolidation to remain in place over the next two years.
China’s economy-wide leverage is likely to continue rising, with pockets of financial stress developing periodically for some local banks or State-Owned Enterprises (SOEs).
The recent restructuring of Barbados’s local-currency debt has cut the stock of government debt to 90% of GDP from 101% previously, significantly reduced the interest burden and lowered the government’s financing needs and overall liquidity risks.
Various central government initiatives have strengthened governance standards and tightened federal oversight of regional governments, but some regions to still face high refinancing risks.
Backed by strong profitability, Islamic banks in Malaysia and Indonesia have plans to step up investment in digitization. These efforts will lead the industry to expand further at lower cost.
Argentina's Federal Fiscal Responsibility Council published the results of its evaluation for 2018 and first-quarter 2019, which showed that the provinces generally were in compliance. The results are credit positive.
All but five of the 47 rated South and Southeast Asian high-yield companies have protections to limit the effect of a significant depreciation of their local currencies against the US dollar.
After a period of relative calm, the Turkish lira came under renewed pressure in the first half of 2019 amid investor concerns about accelerated reserve depletion and expanding fiscal deficits.
Mauro Leos and Gabriel Torres discuss the credit implications of income inequality. While income inequality is not a differentiating factor of ratings across all sovereigns, for some, rising income inequality exacerbates broader credit challenges.
A proposal to allow government-managed retirement funds to compete directly with banks in offering payroll loans would be challenging for banks that have a niche in payroll loan.
Our credit view of Turkey balances its large economy and healthy public finances against further erosion in institutional strength and high external vulnerabilities.
An analysis of the sovereign credit implications of economic growth dynamics and fiscal consolidation in India.
China will maintain its gradual and cautious approach to financial liberalization. However, the pace will gradually accelerate as the cost of restrictions on more strategically important sectors becomes increasingly apparent.
Bahrain, Kuwait, Qatar and Iraq, and to a lesser extent, Saudi Arabia and the UAE, depend on the Strait to transport oil and gas exports, exposing them to geopolitical risk.
This video outlines how growth recovery and debt issuance will continue while highlighting the fluidity of the political environment in key nations across Africa, as well as then increasing importance of fintech to banking growth.
Structurally low growth, fiscal strength eroding but a number of factors insulate the sovereign's credit profile from financing shocks.
This new compilation showcases our latest research on key EM sectors, covering China, Argentina, India, Turkey, Russia, and others. The report also offers a data-rich appendix focused on 106 EM sovereigns.
Our comparison of the state of banking service digitalization in Commonwealth of Independent States (CIS) countries shows that Russia is far ahead of the others in this area.
This report outlines key rating trends and drivers for emerging market sovereigns, non-sovereigns and non financial corporates
In this podcast, Singapore-based Managing Director Terry Fanous and Associate Managing Director Ian Lewis discuss coal power in Asia and the challenges surrounding the transition to a low-carbon economy.
A surge in Chinese property bond issuance resulted in a significant weakening of cash leakage and risky investments scores (23% and 12% respectively from the previous 12 months). EM covenant quality remains stronger than in North America and EMEA.
Argentina's provinces will continue to face fiscal challenges as the effects of the recession filter through. We expect real GDP to contract by 1.5% this year, following a 2.5% contraction last year, weighing on provinces' revenue intake.
Russian oil and gas companies will record strong financial results in 2019, driven primarily by their dominant upstream operations. EBITDA margins will stay broadly flat after a record 2018.
Financial policies remain balanced despite increased capital spending and continuing high dividends. Exposure to fragile domestic demand is balanced by steelmakers’ competitiveness in export markets.
Brazil’s new government has announced a wide-ranging reform agenda, including fiscal and structural reforms aimed at improving the overall business environment and reducing the role of the state in the economy.
Although our baseline expectation is for credit conditions to remain steady this year, growing vulnerabilities will likely test the region's credit fundamentals as financing conditions tighten, trade tensions persist and China's economy cools.
Ruling AK Party loses control of Ankara and other key cities amidst deepening recession ahead of long election gap, which may propel long-delayed economic reforms.
The credit implications of the disclosure of unreported financial liabilities depend on their scale, schedule of payments, denominated currency and the contractual seniority.
Under the Senate-approved proposal, credit bureaus in Brazil would no longer need borrowers' authorization to collect data about payment histories, including positive credit data.
A large share of rated CIS banks' credit profiles are weakened by corporate governance risks. Irregularities and financial weakness stemming from poor corporate governance have been key reasons for bank closures in the region.
The eight rated Indonesian developers face increasing funding costs amid upcoming debt maturities, which will weaken interest coverage of rated developers.
Russia’s return to investment grade reflects an improvement in the country’s already robust public finances, enabling it to withstand the effect of further sanctions that the US is likely to apply in the coming months.
Slower global growth will weigh on economic momentum in emerging markets in 2019. Political risks will be in focus in large markets in Asia, as well as in Latin America.
New CEOs at Brazil's three state-owned banks recently laid out new strategic priorities that will sharpen focus on businesses and market segments critical to earnings and improve capital.
this study, we examine the credit performance of nonfinancial companies in emerging markets from 1995 to 2018, the variance among countries, the contributing factors to defaults, and a comparison with trends in advanced markets.
Banks are bearing the brunt of government interventions to bolster the economy. Most rated corporates will continue to display a degree of resilience to the downturn, but renewed exchange rate volatility would make operating environments challenging.
The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects.
The region's economic growth momentum will persist while broadly improved debt structures will mitigate risks from tightening global liquidity. Downside risks stem from evolving political landscapes and their policy implications.
Against the background of the ongoing recession across the national economy, Argentina’s provinces will face increased financing costs, weaker debt metrics and greater refinancing risks due to higher interest rates and foreign-currency debt exposure.
The operating environment is improving in key CIS markets, but GDP growth is moderate and geopolitical risks persist for Russia and Ukraine.
As China's regional and local government bond market grows, we see an increasing focus on, and larger quotas for, Special Purpose Project Bond (SPPB) issuances. SPPBs are often labeled revenue bonds in China, but differ from revenue bonds in the US.
An unconventional style of policy execution weighs on market sentiment while policy proposals are credit negative for oil and construction companies and Mexican states in particular.
Rising infrastructure spending as well as the limited borrowing capacity of Chinese regional and local governments (RLGs) mean high liabilities of local state-owned enterprises (SOEs) will continue to grow, constraining the credit quality of RLGs.
Our stable outlook for African banks reflects expectations of a slight acceleration in growth and stricter regulation that supports financial stability; but risks are titled to the downside.
The change will help to address the mismatch between regional and local governments' limited fiscal resources and significant regional social spending responsibilities.
Stable rating trends for non-financial corporates in Asia Pacific is likely to continue through 2018 but intensifying US-China trade disputes and slowing growth increase downside risks.
Declining federal transfers, weak own-source revenue and higher levels of current expenditure are leading to lower levels of infrastructure spending by Mexican states, a credit negative.
Continued, though slowing, GDP growth in Asian and global economies will support stable credit conditions. Rated companies’ financial leverage will improve slightly on moderate earnings growth.
Our outlook balances strong domestic growth and other buffers in most emerging markets with more challenging credit conditions, as global growth slows, interest rates rise and the effect of US-China trade frictions unfolds across the global economy.
Insurance markets in six major Association of Southeast Asian Nations (ASEAN) are at various stages of development. Their insurance growth prospects are supported by strong socio-economic fundamentals.
The Chinese government is likely to continue to tolerate isolated bond defaults because it considers liquidation as one of the options in resolving debt problems of zombie companies.
Overall leverage is moderate in LatAm compared to other regions, which supports their economies' resilience to shocks. Exceptions include Argentina, Barbados, Belize and Jamaica.
Jair Bolsonaro’s election as Brazil's president will improve investor sentiment, bolstering the real and business confidence, but the exact direction of his economic policy remains unproven.
This edition shows LatAm high-yield issuances in 9M 2018 at lowest level since 2011 on fewer deals from Petrobras, external uncertainties and country-specific issues.
We expect Russian non-financial companies' credit quality to remain stable in 2019 amid continued modest economic growth. However, the threat of additional US sanctions remains a key risk.
High debt burdens and institutional limits related to fiscal management constrain the fiscal profiles of many Caribbean sovereigns.
Refinancing continues to drive market activity, but issuance levels slow as credit conditions tighten for Asian high-yield.
In this report, we compare the standalone credit profiles of banks in Brazil, Russia, India, China and South Africa (BRICS). The overall credit profile of Chinese banks is the strongest and that of Russian banks is the weakest.
Commodity- and remittance-dependent Central Asian economies experienced high growth historically, but sustainability of their economic models are now in question.
The Chinese government’s increasing focus on environmental protection will lead to an increase in costs and potential production suspensions in various commodity sectors.
The average covenant quality score for the full-package EM bonds is 2.80 (moderate), considerably stronger than the 3.31 average (moderate ↓) for EMEA (excluding EM) and 3.75 (weak) for North American full-package bonds.
Mexico’s minimum 3% leverage ratio will ensure banks do not increase their balance sheets excessively relative to core capitalization.
Sri Lanka, Armenia and Pakistan are vulnerable to tightening funding conditions in the next couple of years, while Tajikistan and Zambia are exposed over the next decade.
Sri Lanka, Armenia and Pakistan are vulnerable to tightening funding conditions in the next few years, while Tajikistan and Zambia are exposed over the next decade.
Brazil’s fintech firms are taking advantage of a large population, low levels of financial inclusion and a smartphone-friendly generation to offer low or even no-cost products and services.
Argentines remain confident in the banking system and have not significantly withdrawn deposits. For now, liquid assets at banks remain ample in both US dollars and pesos, limiting funding and foreign currency risks.
On 30 September, trade ministries from the US, Canada and Mexico announced a revamped North American Free Trade Agreement. This development reduces trade-related uncertainty, supporting Mexico's and Canada's near-term growth and investment prospects.
Argentina and Ecuador are the most exposed to tightening in global financing conditions. Credit risks are mitigated for most across Latin America.
Our outlook for Brazil's banking system is stable and reflects our view that a growing economy will boost business for banks over the outlook period.
The new tariffs mark a significant escalation of the ongoing trade dispute between the two countries and apply to a broad spectrum of Chinese products.
High loan and deposit concentrations raise the risk of credit losses and a liquidity shortage.
Rapid and divergent demographic changes in Asia Pacific over the next decade will lead to opportunities for some of the 17 banking systems in the region and challenges for others, including from the effects of shrinking prime-age populations.
Indonesia’s strengthened policy framework is containing credit risks associated with the rupiah’s rapid decline. But additional currency weakness would have economy-wide credit-negative effects.
We expect commodity prices in rand terms to remain broadly flat, so margins will be determined by production costs.
South African companies are less exposed to currency volatility than firms in other emerging markets. This is because South Africa’s deep and well-developed rand debt capital market has reduced the need for companies to use foreign currency debt.
Most Turkish companies we rate can cope with the weak domestic operating environment because of their robust business profiles, balance sheet strength and healthy liquidity.
China's pledge of $60 billion in financial support to African governments is an important financing source for their infrastructure investment, but will amplify existing risks.
Our view on the impact of the recent weakening of the Indian rupee against the US dollar and its impact on rated Indian corporates.
Securitisation has proved to be a valid source of funding for the South African economy over a long period, financing loans granted to households - particularly mortgages - and to small and medium-sized enterprises.
This addendum to our March 2018 study compares the credit performance of projects located in advanced economies with projects located in emerging market and developing economies.
This semi-annual chartbook brings together an overview of our rated developers in Indonesia, covering key credit themes, rating trends, as well as economic indicators.
We expect total sukuk issuance to be broadly stable in 2018, although the sector's long term prospects remain strong.
We expect the government to scale up borrowing through government-related entities, which will increase contingent liability risks.
Argentina's central bank raised the country’s benchmark interest rate to 60% from 45%, which along with the weak peso will keep corporate leverage and margin metrics stressed through 2019.
Russian oil-producing regions will benefit from higher corporate income tax collection from oil companies.
Domestic issuers' high exposure to Turkey’s macroeconomic environment and banking system means they will likely face adverse impact if credit pressures in the sovereign environment persist.
This compendium brings together Moody’s recent research on African sovereign, banking and corporate finance credit.
Year-on-year nationwide contracted sales growth picked up in July but will slow during the remainder of the year. Rated developers have high refinancing needs over the next 12 months.
Large shareholders that secure loans by pledging their shares in onshore-listed companies face increasing refinancing risk, which could have knock-on effects for the companies.
Higher oil prices and rising interest rates will have varying credit implications for the Indian sovereign and banking sector.
A new round of financial volatility is rattling Argentina's economy while a massive corruption scandal is hitting big companies. This report looks at how these events affect credit issuers.
The Chinese sectors with the most immediate exposure are within high-value manufacturing, while US companies with a high reliance on Chinese imports will also incur negative effects.
Investor concerns about Turkey's economic and financial stability have sparked a renewed focus on the vulnerabilities of other emerging and frontier markets.
Growth prospects for many of the G-20 economies remain solid, but there are indications that the synchronous acceleration of growth heading into 2018 is now giving way to diverging trends.
Intensified regulatory measures continue to constrain shadow banking growth.