Getting junked for a reason

CALL it by any other name, negative perception, weak confidence, sabotage, speculation or arbitrage, but financial markets will continue to race ahead in pricing in a worse set of outcome when there is a dearth of policy measures to counter specific market-related headwinds.

Following S&P’s downgrade of Brazil to junk status, it has become rather fashionable to grade certain emerging market economies as “junk”. In this context, Moody’s view of six developing nations, including Malaysia, deserve to follow Brazil into junk status, if credit-default-swaps traders are to be believed, comes as no surprise. The other five economies that are seen by credit default swap (CDS) traders as “junk” include Peru, South Africa, Turkey, Kazakhstan and Bahrain. It’s immaterial attempting to identify a common denominator among the six as a factor for “junk” status by CDS traders. At this current juncture, after all what’s needed is solutions instead of the “Why” question.