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EM corporate debt likely to remain resilient in 2021 – Report

EM corporate debt likely to remain resilient in 2021 – Report
The MEA region had the lowest number of corporate debt defaults in 2020

Mubasher: Companies in the Middle East and Africa (MEA) region recorded the least number of debt defaults in 2020 amid the coronavirus (COVID-19) pandemic.

Despite the challenges posed by the pandemic, investment experts at Aberdeen Standard Investments (ASI) forecast corporate debt in emerging markets (EM) to remain resilient in 2021 and beyond.

The percentage of EM companies defaulting on debt is projected to be lower than in many mature markets, experts noted.

Amid the pandemic, “reduced revenues and profits have made debt servicing more challenging for more companies and this is reflected in more distressed credits and rising corporate default rates,” said Kathy Collins, Investment Director, Emerging Market Corporate Debt, Aberdeen Standard Investments.

EM corporate debt has not been immune to this trend. However, concerns that emerging market debt issuers might be particularly exposed in this respect are misplaced,” Collins noted.

“Historically, the EM corporate debt market has been relatively resilient to past major crises, and this is also evident in default data from the pandemic-hit 2020,” Collins added.

In 2020, a total of 211 rated corporate issuers defaulted, compared to 105 in 2019.

The MEA region had the lowest number with just two, followed by Latin America with 13 and Asia-Pacific with 17. America and Europe recorded 141 and 38 corporate defaults, respectively.

Debt issuance by MENA governments hit an all-time high of $120.7 billion last year and GCC region exceeded $100 million for the first time for issuances.

The UAE and Saudi Arabia secured the largest value of bond proceeds with $40.6 billion and $31.4 billion, respectively.