Manipulating your economy only goes so far.
Via Reuters:
A Moody’s downgrade on China on Wednesday and the likelihood that Brazil and South Africa face further rating cuts in the coming months is highlighting how emerging market credit quality remains stuck in reverse.
Since the start of 2014, Reuters analysis shows that the big three rating agencies – S&P Global, Moody’s and Fitch – have racked up more than 150 emerging market downgrades between them.
That averages out a roughly one a week and though there have been hopes that rising global growth and commodity prices will ease the pressure, that does not seem to be occurring yet.
S&P has more negative outlooks — effectively downgrade warnings — than it does positive ones by a score of 26 to 5, its heaviest downward bias ever according to its chief sovereign analyst.
After 20 EM downgrades last year, Fitch has already cut seven countries since the start of this one, including Turkey, South Africa and Saudi Arabia, and El Salvador twice.
Those moves have left it 13 negative outlooks and it thinks the worst may be past. But Moody’s, which delivered China’s first downgrade in 30 years on Wednesday, still has around 25 to resolve.
“Just looking very simplistically at debt to GDP, the fact is that most countries in emerging markets have seen an increase,” said Pictet portfolio manager Guido Chamorro.
“And even with some of the green shoots we have seen in EM, that trend is not expected to reverse for several years so it is not a surprise that rating agencies are still downgrading.”