As part of its surveillance of international financial markets, the IMF began publishing a quarterly report on Emerging Market Financing (EMF) in 2000. This report regularly reviews developments in emerging markets and the outlook for capital flows to these markets, and it examines issues related to the functioning of international capital markets. The latest EMF report (fourth quarter, 2000) analyzes periodic bouts of contagion across emerging markets and sporadic closures of emerging debt primary markets.
Several effects collectively took a toll on emerging bond and equity markets in the last quarter of 2000, including heightened expectations of a slowdown in the U.S. economy; lowered earnings potential of the technology, media, and telecommunications sectors; and a deterioration in U.S. credit markets. As emerging market spreads widened sharply, tighter external liquidity conditions focused investor attention on prospects for the two largest emerging market borrowers in international bond markets—Argentina and Turkey. Despite an almost complete drying up in bond issuance, total emerging markets fundraising on international capital markets, nevertheless, held up relatively well, supported by a surge in equity placements from China and a robust syndicated loan market. For the year as a whole, fundraising reached its second highest level, behind only the peak boom year of 1997.
The outlook for emerging market assets and financing remains closely tied to developments in the external environment. Changing expectations of the relative probabilities of “soft” versus “hard” landing scenarios for the United States are likely to keep markets volatile. The baseline outlook for 2001 is for moderation in bond financing, selective equity placements, and a supportive loan market.
The EMF report is available at http://www.imf.org/external/pubs/ft/emf/index.htm