Why Are Some EMEA Sovereigns Embroiled In The Current Market Turbulence At All?
The background and the possible contagion of the current financial squeeze is markedly different from the Asian or “Tequila” crises or the emerging market debt crises of the 1980s. This time round the epicenter of the emerging market jitters is located in the U.S. property market. Although investors’ reassessment of risk is not rooted in the imbalance in the emerging economies themselves, this is unlikely to shield the latter from the knock-on effects of the general repricing of risk among investors. Nowadays there is much more uncertainty about how the rediscovery of risk aversion is being transmitted throughout the markets, as it is still poorly understood which institutions hold the securitized subprime and related risks that have spooked investors over the past month or so. As recent disruptions in the asset-backed CP markets demonstrated, this lack of transparency on the ultimate holders of the often illiquid structured securities has led to a heightened reluctance of banks to len
