SOURCE: Alliant Emerging Markets

November 28, 2007 05:00 ET

Alliant Emerging Markets Releases Country Risk Ratings Updates

Credit Risk in Emerging Markets Hit By Global Credit Crunch

NEW YORK, NY--(Marketwire - November 28, 2007) - For the second time in 3 months, Alliant Emerging Markets (AEM) downgraded the credit risk ratings of two emerging markets: Kazakhstan and Venezuela. AEM already downgraded credit risk for Argentina and Algeria earlier this Fall. While Alliant's overall Emerging Markets Risk Index (AEMI) was largely unchanged at 59.74, AEM reported an increase in credit risk of 5% for the same period in key emerging markets.

Dr. Michel Léonard, Chief Economist and Senior Vice President for AEM, said, "Credit markets in emerging economies have started to show signs of vulnerability to the global credit tightening. While many observers are betting on emerging markets to come to the rescue of the US economy, a closer look casts serious doubts over that scenario."

There are bright spots: AEM upgraded Nigeria's credit risk following the country's impressive reduction in debt and non-oil growth. "The reality we must face is that there is not enough data to statistically support the belief that emerging markets have entered a new phase of resilience. The crisis in the sub-prime market was, in part, the result of quantitative models applied to new classes of assets without adequate stress testing. Even the most liquid credit markets in emerging markets lack data to accurately model risk across cycles. The main threat to effective risk management is the premature belief that markets have developed newfound immunity to cyclical weaknesses without data to support this claim," Dr. Léonard said.

AEM reported that insurance markets continue to provide credit protection in key markets, including those recently downgraded by AEM. John Minor, AEM's Executive Vice President and Managing Director said, "Credit underwriters, who often lack data to engage in purely quantitative modeling, have done a better job at stress testing their portfolios and managing credit risk and continue to offer credit protection, both in the US and emerging markets, that are priced aggressively, often at a fraction of the CDS markets."

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Alliant Emerging Markets (AEM) (, is part of Alliant Insurance Services, a Blackstone Group company. AEM is the leading firm specializing in political risk assessment and insurance. Its clients include F100, banks, hedge funds, private equity and energy companies. Its principals bring more than 50 years of experience in risk intelligence, analysis and insurance.

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