Research published Wednesday by Nomura suggest that emerging markets, above all Hong Kong and China, face an acute danger of financial crises in the next few years of scopes comparable to the Asian crisis of 1997-98.
An analysis of 60 early warning indicators, such as private credit-to-GDP ratio and real property prices, showed that “EM countries are considerably more vulnerable than DM countries to credit and financial stress,” according to the authors of the report.
Those countries that were facing serious trouble in at least 30 of the indicators were deemed at risk of either financial crises or a steep drop in domestic demand. Hong Kong, with 52 signals under threat, was “well in the danger zone”, whilst China had 33 despite recent improvements due to the deleveraging campaign.
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