Brazil Downgrade Means Debt Outflows in Emerging Markets

Emerging markets will suffer accelerated debt outflows if Brazil receives a sovereign credit downgrade, says Deutsche Bank.

In their weekly fund flows report, Jan Rabe and Adrian Rott of Deutsche Bank, also point out that developing market equities continued to enjoy strong inflows.

Brazil’s host of problems

The Deutsche Bank analysts point out Lat-Am’s largest economy is running the biggest budget deficit since 2009 and facing a host of problems. To just name a few, the analysts point out Brazil’s inflation is still out of control, the yield on government debt is showing a rising trend and the country is facing a growing backlog in its reform initiatives.

The analysts note...