There is ample room for emerging market corporate debt to grow. Companies need more financing, and their economies are growing faster than in the developed world. But these are just the conditions in which bubbles can form. The internet drove much real growth, but it still created one of history's greatest bubbles because people grew excited and overestimated that growth.
There is further reason to worry about debt. When the balloon went up in 2007, credit was a vehicle used mostly by institutions. Now, thanks to exchange traded funds, credit is available at a low price to retail investors.
Even though corporate debt in emerging markets tends to be much less liquid than equities, it is available through ETFs, which promise to be as liquid as any stock. What would happen if large numbers of investors tried to exit at once?
Credit is still a long way from the mad overextension it had reached by 2007. But some corners of the credit market are bubbling over and that should cause concern.
—By John Authers, The Financial Times