Posted on 10/14/2008 7:16:07 AM PDT by TigerLikesRooster
Emerging nations hit by growing debt fears
By David Oakley in London
Published: October 14 2008 03:00 | Last updated: October 14 2008 03:00
Investor fears over the risk of many emerging market countries defaulting on their debt have risen sharply as Iceland's financial collapse has hit sentiment, discouraging funds from investing in these economies.
The market is pricing the risk of default for countries such as Pakistan, Argentina, Ukraine and Iceland at 80 per cent or higher as their banking systems come under increasing pressure due to the credit crisis.
Trading in credit default swaps - a form of insurance against bonds defaulting - indicates expectations that Pakistan has a 90 per cent chance of defaulting on its debt.
CDS spreads on Pakistan, which is haemorrhaging foreign exchange reserves to prop up a weak rupee, have risen to a record 3,026 basis points, or a cost of more than $3m to insure $10m of debt over five years. This is a threefold jump since the collapse of Lehman Brothers on September 15.
Other countries running into difficulties include Kazakhstan and Latvia, which have highly leveraged banking systems that have sparked growing concerns over the health of their economies, and Turkey, which has one of the highest current account deficits in Europe.
Nick Chamie, head of emerging markets research at RBC Capital Markets, said: "Although I would not say any of these countries are likely to default in the coming weeks, there is certainly a higher risk. They are all suffering from the problems in the rich countries. They are the collateral damage of the western credit crisis."
(Excerpt) Read more at ft.com ...
Ping!
This is why Zardari has made a trip to China.
Between the Saudis and the Chinese, they’re going to pull Pakistan’s financial chestnuts outta the fire.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.