Emerging Market Corporate Debt: Two Telling Trends

April 5, 2014 9:15 AM
By Jerald M. Lanzotti, CFA

Emerging economies continue to outpace their developed peers, while the market for EM corporate debt has expanded.

As I highlighted in my recent article on lordabbett.com, emerging market economies are growing and becoming a bigger slice of the overall global pie, representing 36% of global gross domestic product (GDP) in the second quarter of 2013, up from only about 20% 10 years ago. Half of global consumption will come from EMs by 2025, according to J.P. Morgan. According to J.P. Morgan, GDP growth be 4.6% in emerging markets for 2013, versus 1.0% in developed markets. But economic growth tells only part of the story.

Take a look at the accompanying chart. In 2012, corporate and sovereign debt sales in emerging markets hit $411 billion, more than 80% of which was issued by the corporate market, according to J.P. Morgan. This continues a growth trend that has been visible over the past six years, with corporate bond issuance, including issues from state-owned companies, nearly three times the level of sovereign bond issuance. Clearly, EM corporate debt is no longer a fringe asset class, but a mainstream part of the market with substantial issuance and market access.

EM External Debt Issuance Has Shifted to Corporates

Annual issuance

Source: J.P. Morgan. As of June 2013.

Taken together, the economic growth and issuance trends are compelling in their own right. But there's much more to the story, which you can read in full here. In the meantime, please let us know your thoughts on the topic in the Comment section, below.

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