JPMorgan Cuts Forecast for Emerging Market Corporate Defaults

FILE PHOTO: A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo
FILE PHOTO: A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo
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JPMorgan Cuts Forecast for Emerging Market Corporate Defaults

FILE PHOTO: A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo
FILE PHOTO: A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo

Investment bank JPMorgan cut on Monday its forecast of the number of emerging market companies expected to default on their debt, following the biggest improvement in distressed-level market pricing since 2016.
With some defaults out the way and others not having materialized, 2024 is also expected to be the first year since the start of the COVID-19 pandemic in 2020 that EM corporate default levels fall below the historical average.
The bank lowered its high yield or 'junk'-rated EM corporate default forecast to 3.6% from 4.0% globally and to 2.1% from 2.9% for firms in the closely-followed CEMBI Broad Diversified index, which is run by a separate JPMorgan unit.
"We see lower risks for the rest of the year as some of the default candidates rolled off and others already materialized, while new additions were limited," the bank's analysts said in a research note.
Problems are expected to stay concentrated in China's property sector and among "repeat defaulters" in the likes of Latin America, although the bank also pointed out that there had not been a Ukrainian default yet this year, despite its war.
Regionally, Asia's default forecast was left at 4.5% overall and 2.5% for the CEMBI group. Latin America's was cut by 1% to 4.6% and to 2.8% for the CEMBI.
EM Europe was lowered to 2.0% from 3.0% and to 2.3% for CEMBI BD HY, while Middle East & Africa was nudged up to 0.6% from 0.5%, with the CEMBI at 0.5%.
According to Reuters, the note highlighted how much more optimistic international investors now seemed to be.
The share of EM firms viewed as being in a "distressed" state and at serious risk of default had plunged 7% this year - distress being defined as having a 1,000 basis point risk premium or 'spread' on their bonds.
That is the largest improvement in any calendar year since 2016, JPMorgan's analysts added.
"Assuming 50% of bonds trading at distressed levels may default 12 months forward suggests a 4.6% default rate, but we believe this outcome is unlikely," they said.
This was because more than half the distressed volume is from China, where bond prices are depressed in excess of the actual default risk, they added.



New Legislation Facilitates Investment in Saudi Tourism Sector

Saudi Minister of Tourism Ahmed Al-Khatib (Asharq Al-Awsat)
Saudi Minister of Tourism Ahmed Al-Khatib (Asharq Al-Awsat)
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New Legislation Facilitates Investment in Saudi Tourism Sector

Saudi Minister of Tourism Ahmed Al-Khatib (Asharq Al-Awsat)
Saudi Minister of Tourism Ahmed Al-Khatib (Asharq Al-Awsat)

Saudi Minister of Tourism Ahmed Al-Khatib said, in an interview with Asharq Al-Awsat, that work is underway on new regulations and legislation that will facilitate the investment process in the Kingdom.
Saudi Arabia is witnessing a major transformation in the tourism sector after it enacted and developed a number of regulations and launched mega projects that allowed the country to attract more than 100 million visitors last year, the target initially set for 2030.
During a press conference on Wednesday at the Abu Faraj heritage palaces in Al-Aziza, west of the city of Abha in the southern Aseer region, Al-Khatib revealed the ministry’s moves to provide appropriate long-term funding at a competitive cost in order to encourage investment in the Saudi tourism system.
In his remarks to Asharq Al-Awsat, the minister pointed to the most prominent achievements in the sector, revealing that the Kingdom received 60 million visitors during the first half of 2024, with spending amounting to SAR 143 billion ($38.1 billion), recording about 10 percent growth in the number of tourists and spending.
He added that by the end of the first half of this year, the sector’s contribution to the gross domestic product had reached 5 percent, and was moving steadily toward achieving 10 percent, which is equivalent to SAR 600-700 billion of tourism income.
Moreover, Al-Khatib also spoke about the launch of the Bachelor of International Hospitality Management program, a partnership between the Ministry of Tourism, King Khalid University, and Hong Kong Polytechnic University.
He noted that a memorandum of understanding was signed between the Ministry of Tourism and the Colleges of Excellence Company, with the aim of developing human capabilities and expanding international specialized technical colleges and strategic partnership institutes in the field of tourism and hospitality.
Al-Khateeb said 10,000 training opportunities both inside and outside the Kingdom would be allocated to those working in the Aseer region’s tourism sector.
The National Tourism Strategy aims to reach over 150 million local and international tourists by 2030. In 2023, it reached 109 million.
The minister added: “The Tourism Development Fund plays an important role in providing financing, allocating SAR 7.4 billion to enable over 100 tourism projects around the Kingdom with a value exceeding SAR 35 billion.”
He pointed out that the fund financed 10 major projects in the Aseer region, ranging from international hotels to multi-use projects with a value exceeding one billion riyals. International hotel brands included: InterContinental Residence in Abha, DoubleTree in Khamis Mushait Governorate, and Khayal Walk Boulevard.