‘Global Financial Stability Report’, by IMF has a key focus on the global financial stability assessment, and the fragilities in Emerging and Frontier Markets.
Summary
Financial Conditions have tightened in EMs ex China, reflected through outflows and asset market pressures
Investor differentiation however remains high with performance driven by fundamentals and idiosyncratic factors. Furthermore, spillovers within EMs have risen but remain below historical highs
A new model on Capital Flows at Risk suggests that medium term downside risks have increased. Portfolio flows are expected to remain subdued given the external backdrop.
Within EM vulnerabilities, high leverage, external connectedness and potential FX liquidity needs remain key.
Investor base dynamics across both sovereign and corporate bonds add another leg of vulnerability; Furthermore, while bond markets have grown sharply, financial deepening varies significantly across EMs.
Full Report below