Emerging markets maintain record foreign borrowing amid Iran war

by@FT

Summary

Emerging-market governments and companies are engaging in a record foreign borrowing spree, demonstrating resilience amid the ongoing conflict in Iran. Investors are increasingly treating emerging-market debt as a diversification option, with foreign investment reaching the strongest pace in over two decades. Despite the challenges posed by higher energy prices and elevated yields in developed markets, Middle Eastern and North African borrowers have continued robust bond and sukuk issuance, primarily driven by financial institutions and government-related entities.

Analysis

Emerging Markets: Emerging markets are economies and financial markets outside the advanced-economy group that attract international investment through government and corporate debt, equities, currencies, and other assets. In the reported development, emerging-market borrowers and investors are maintaining strong cross-border debt activity despite the Iran war and related market volatility. Investor Demand: Recent reporting indicates that foreign investment in emerging-market debt has reached its strongest pace in more than two decades, suggesting that investors are treating the asset class as a diversification destination during broader market uncertainty. Borrowing Activity: Emerging-market governments and companies continue to access international bond markets at a historically strong pace, even as higher energy prices and elevated developed-market yields increase financing risks. Regional Resilience: Middle Eastern and North African borrowers have sustained heavy bond and sukuk issuance during the Iran conflict, with financial institutions and government-related entities leading the market activity.

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macropolitics

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