According to s&P Global Market Intelligence models, the assessment of the probability of default of emerging market companies has returned to the levels that were observed before the start of COVID-19. We used the creditmodel ™ (CM) fundamental valuation models from Credit Analytics, as well as the PD Model Market Signal (“PDMS”) structural probability of default model. PDMS is a structural probability of default (PD) model based on stock quotes and asset volatility as input data for calculating a one-year PD. The sample portfolio includes credit ratings of 6,154 financial and non-financial corporations in Central Asia, European emerging markets (European PP), the Middle East and North Africa (SAAS), sub-Saharan Africa, and the Indian subcontinent. Thus, the peak values of the probability of default of such companies fell in March, after the introduction of quarantine, caused by the acceleration of the spread of COVID-19.
As of July 20, 2020. the reduction in the probability of default for our selected portfolio is due to the recovery of the global economy, improved investor sentiment and financial conditions. According to S&P Global Ratings, ” Financial conditions for developing countries have improved in line with our expectations over the last quarter (i.e., the second quarter of 2020). Ultraadaptive monetary conditions in advanced economies against the backdrop of a massive expansion in the balance sheets of the Federal reserve and other major Central banks, as well as expectations of a more obvious global economic recovery in the second half of the year, support investors ‘ appetite for more profitable and risky emerging market assets.”