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IIF introduces emerging market debt monitor for investors

[NEW YORK] The Institute of International Finance has introduced an emerging market debt monitor to analyze risks associated with investing in the sector.

The quarterly monitor tracks sectoral and external debt in 18 emerging market countries with focus on changing dynamics impacting the rapid buildup in emerging market debt. Total emerging market debt has risen by US$28 trillion to 195 per cent of GDP since 2009, according to data from the IIF, a Washington, DC-based global trade group of financial institutions.

The IIF created the monitor after receiving requests for information about emerging market debt from its members who are investing "in a world where capital flows to emerging market countries have become more volatile and subjective to changing appetite for emerging market debt," said Sonja Gibbs, director for global capital markets at the IIF.

The monitor will provide country-to-country and sector-to-sector comparisons with details about global debt across household, government, financial and non-financial corporate sectors, which has risen by US$50 trillion since 2009.

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The public sector in developed markets and the non-financial corporate sector in emerging markets have each risen by US$13 trillion since 2009, driving the buildup of global debt and are key elements in the IIF's monitor.

"When you try to analyze debt you have to provide a comparison across emerging markets and relate it to developed markets for a full understanding," said Emre Tiftik, financial economist for Global Capital Markets at the IIF.

Although debt issuance in emerging markets has declined this year, investors are returning to the sector where they are finding value and returns in bonds denominated in local currency in countries including Brazil, Turkey and Mexico.

The IIF will continue to modify the monitor over the next year or two with interest in finding a way to highlight specific debt ownership in emerging market countries.