Organisation

The decision to reassign Hungary’s investment grade will bring delight to Budapest, bringing the sovereign borrower correctly in line with Romania, but S&P needs to take note – Euromoney’s country risk survey is shining the spotlight on another country that is closely aligned.

Continuing engagement with the IMF is a positive sign, but it’s a long way back as the economic, political and security risks are still sky-high.

Hungary’s improving score in recent years prompted ECR in April to highlight the potential for the sovereign’s upgrade. Five months later, on September 16, rating agency S&P did just that.

Poland’s declining risk score trend in Euromoney’s survey signals the rating agency is lagging experts in the field.

The borrower will not challenge Indian safety for the foreseeable future, but faith in the emerging market (EM) is justified by its improving risk score.

While the focus has been on how Italy must resolve its banking sector problems, investors should also be keeping an eye on the risks lurking elsewhere in Europe.

Uncertainty is increasing for peso assets as the fight for the White House heats up. Even a victory for Hillary Clinton comes with reservations attached, demonstrating how it is not just the possibility of Donald Trump winning that is ringing alarm bells.

Country-by-country assessments of Europe’s banking sector show that risks are at new highs, as the financial services industry struggles to cope with the aftershocks of the 2007/08 crisis. Resolving the Italian bank crisis is key to how it will all pan out.

Euromoney’s survey shows the UK’s risk score falling in the wake of the shock referendum decision coming out in favour of a withdrawal from the European Union. The risk experts acknowledge the potential longer-term positives, the swift changes shoring up political stability, and the opportunities created by the pound depreciating. They are nevertheless concerned by the economic outlook and its impact on the fiscal metrics.

Citi Research has released a detailed report combining its own econometric model with the output from Euromoney’s Country Risk Survey to yield a new, more powerful tool for identifying default probabilities and relative value for sovereign issuers.

Act now before the nuisance becomes a real headache!

Even by the standards of today’s fast-changing regulatory environment, the new OTC variation margin requirements due to be introduced from March 2017 pose a major challenge to sell-side and buy-side alike. Asset managers will face major operational burdens and risks as they prepare to comply; the scale of which may not yet be fully appreciated.