With tensions ratcheting up in the geopolitical tinder box of Ukraine over the weekend, could the troubled Eastern European nation trigger a full-blown emerging markets crisis?
Ukraine's shaky new government on Sunday ordered full military mobilization in response to Russia's build-up of its forces on the Crimean peninsula, complicating the country's economic challenges and further raising the risk of a sovereign credit event, according to market watchers. Ukraine's long-term rating was cut from 'CCC plus' to 'CCC' last month by Standard & Poor's, which said the political crisis had put the country's ability to service its debt at risk.
While risks in Ukraine are likely to draw investor attention to still fragile situations in other developing economies such as Thailand, Venezuela, Turkey and Argentina, experts don't see foresee a widespread crisis across emerging markets for the time being.
"At this stage, we see the main risks in concentration risks, i.e. losses on Ukrainian assets forcing selling and unwinding of positions elsewhere in the EM space," Michala Marcussen, global head of economics at Societe Generale, wrote in a report on Monday.