Headlines

Latin America’s luck will change. Pandemic lockdowns caused more regional corporations to default between early May and June. But yield-starved investors will ignore some of these risks, Reuters reported. There’s a lot of bad news to ignore. The International Monetary Fund expects Latin American and Caribbean economies to contract by more than 8% in 2020, the most of any region, with only a 3.6% improvement in 2021. And non-financial companies with foreign debt have seen revenue dented by a combined $200 billion due to the pandemic, Fitch Ratings estimates.

The drop in the amount of distressed debt across emerging markets has been a barely anticipated bonus for many countries this year. But it’s scant comfort for those nations still struggling with mounting obligations, Bloomberg News reported. The number of emerging- and frontier-market nations with debt trading at distressed levels -- yields more than 10 percentage points above those on U.S. Treasuries -- has tumbled from as many as 19 at the height of the coronavirus selloff in March to about a half-dozen now.

Japan’s government in December cut its view on consumption for the first time in three months, and said overall economic conditions were still severe due to the coronavirus pandemic, Reuters reported. Authorities said the world’s third-largest economy is facing increased risks from a resurgence in COVID-19 cases at home and abroad, leading to an outlook downgrade though those remained underpinned by hopes for an economic rebound.

South Africa’s state power monopoly says it will need to charge consumers more for electricity if it is to cut its debts and stave off bankruptcy, even as rolling blackouts continue to plague Africa’s most industrial nation, the Financial Times reported. Years of corruption and mismanagement under disgraced former president Jacob Zuma left Eskom with surging costs, falling revenues, a fleet of breakdown-prone coal power stations and ballooning debts.

China’s central bank will scale back support for the economy in 2021 and cool credit growth, but fears of derailing a recovery from a pandemic-induced slump and debt defaults are likely to prevent it from tightening any time soon, policy sources said, Reuters reported. This expands on a theme recently outlined at China’s annual Central Economic Work Conference to plan for 2021, where leaders said the country would keep its proactive fiscal policy and make monetary policy flexible and targeted.

The new mutation of COVID-19 risks increasing debt defaults among junk-rated companies next year above what was previously anticipated, Russell Investments’s global head of fixed income said on Tuesday, Reuters reported. A highly infectious new strain of the virus that has led much of the world to cut off travel ties to Britain could increase the U.S. high-yield bond default rate to 6%-8% in the next 12 months, compared to earlier expectations of 5%-8%, Gerard Fitzpatrick told Reuters.

Planemaker Airbus has said it stands to lose more than $5 billion worth of orders if AirAsia X Bhd’s (AAX) debt restructuring scheme goes through, court documents showed, joining more than a dozen creditors that have challenged the Malaysian low-budget carrier’s plan, Reuters reported. Airbus’s challenge comes as AAX defends its scheme from claims by key lessor BOC Aviation (BOCA) that it favoured Airbus and lacked a debt-to-equity swap offer for creditors. In a Dec.

South Korean carmaker Ssangyong Motor has filed for bankruptcy after failing to repay creditors, a move analysts said signals that the government is unlikely to bail out pandemic-hit companies that have foreign backers, the Financial Times reported. Ssangyong, 75 per cent-owned by Indian automaker Mahindra & Mahindra, has filed for court receivership and warned of massive disruptions to its operations after defaulting on loan payments of about Won60bn ($54.4m).

Finance Minister Nirmala Sitharaman on Monday said the government is planning to extend the suspension of fresh insolvency proceedings for another three months, a move which will provide major relief to corporate borrowers hit by the coronavirus pandemic, Deccan Herald reported. Addressing the Bangalore Chamber Of Industry And Commerce (BCIC), she said the government has taken several measures, including deferment of tax payment date, to help businesses and people.

Investors hope that for policymakers, 2021 will be the year of speaking carefully. Central banks and governments rode to the rescue of markets in 2020, blasting the financial system with cheap cash, liquidity and promises of long-term support on a huge scale, the Financial Times reported in a commentary. Fund managers were not always the direct target of that support, of course, but the effect is the same. The global financial system peered over the brink in March, and swiftly retreated.