RATINGS
S&P demolishes a big distinction between emerging and developed markets
'We believe it may no longer be possible to separate advanced economies from emerging markets by describing their political systems as displaying superior levels of stability'
On Wednesday, S&P Global Inc. dropped a bombshell on the sovereign-credit ratings community. Sounding the alarm over the rise of populism in Europe and the U.S., the credit agency said key historic drivers of the creditworthiness of advanced economies over their emerging-market counterparts — the strength of institutions and quality of policy making — can no longer be taken for granted. That represents a potential game-changer for a slew of developed markets, which have historically enjoyed uplifts in their ratings simply by virtue of the strength of their political architecture relative to emerging markets. "This represents a big shift in views," says Richard Segal, emerging market analyst at Manulife Asset Management Ltd. "One of the main arguments for higher ratings for developed markets relative to emerging markets has been institutional quality. If that differential — the quality of institutions between the two groups — is narrowing, so might the differential between their cred...
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