Emerging market sovereigns are on the upgrade trail: S&P

Mumbai: Credit trends remained decidedly positive for emerging market sovereigns during the 12 months through 31 August, 2006. Among 34 emerging market sovereigns, eight were upgraded, and only one was downgraded, according to Report Card: Emerging Market Sovereigns Hike The Upgrade Trail, published on Sept. 6, 2006, by Standard & Poor's Ratings Services.

"Looking backward, these rating upgrades took place during a period of strong global growth, rising commodity prices, ample cross-border capital flows, and low real interest rates--an environment particularly favourable to most emerging market sovereigns," says Standard & Poor's credit analyst John Chambers, chairman of the 'sovereign ratings' committee.

Chambers elaborates further, "Despite a less-benign external environment, sovereign upgrades should continue to exceed downgrades in the near term, as positive outlooks on ratings of emerging market sovereigns outnumber negative outlooks nine to two."

Trends in the subset of emerging market sovereigns also occur at the level of the full set of sovereigns rated by the rating agency, he added.

In advance of this year's annual meeting of the World Bank and International Monetary Fund in Singapore, Standard & Poor's asked 16 of its senior economists and credit and index analysts to examine the broad emerging market landscape, including the roles that government regulations on investment, public / private partnerships, structured finance, and project financing are playing to boost GDP development.

Developing countries together now account for two-thirds of world economic growth. Overall, Asian countries are the leaders, but many non-Asian economies are also booming, says this special report, Emerging Markets: Changing The Rules Of The Game, published in the 13 September, 2006, issue of Standard & Poor's CreditWeek.

Accordingly, the rating agency also says that the definitions of 'emerging market' and 'developing country' may need to be updated or, in some cases, the terms entirely eliminated given what appears to be sustainable economic growth in many of the world's poorer countries, particularly in their private sectors.