EM Ratings Stabilize: Fitch

Emerging Market corporate ratings have normalized in the wake of the impact of the global financial crisis, according to a Fitch report. The ratings agency, in a report titled “Mid-Year Emerging-Market Corporate Outlook 2011,” says it is forecasting 5.5% GDP growth for EM in 2011, and 5.7% GDP growth in 2012, versus global GDP growth of 3.2% in 2011 and 3.3% in 2012. Growth expectations for EM corporates broadly reflect the prospects for global GDP development over the next two years, the agency says. EM and developed market corporate ratings are continuing to converge, according to the report, although LatAm remains constrained by limited scale and diversification, weak financial profiles and corporate governance. Aggregate EM corporate cross-border issuance rose to $309bn last year from $136bn in 2006, although sovereign ($566bn) and EM financial institution ($671bn) continue to dominate. Corporate issuers are being attracted to the global markets by the opportunity to diversify funding and achieve longer tenors. EM corporate issuance is roughly even broken down between LatAm, MEA and CEE, with Brazil and Mexico leading the region for corporate cross-border issuance. EM syndicated lending peaked at $442bn in 2007, and rose only to $263b in 2010. LatAm has not been a significant destination for syndicated lending, accounting for only 9% of the 2010 total, according to Fitch.