Emerging Market Countries Have Sharply Increased Their Corporate Indebtedness

Developing economies are looking extremely shaky on the debt front.

The amount of corporate debt outstanding in all emerging markets is now above 100% in their respective economies. The debt ratio in China is above 150%, though that ratio has been slightly decreasing over the past two years.

A key problem for many of the developing economies is that their corporate debts are denominated in U.S. dollars. And, of course, the U.S. dollar has been increasing in value as the Fed raises interest rates.

In other words, their loans outstanding are becoming harder to repay. The currency plunge in Turkey has already unleashed a wave of bankruptcies and has increased the risk of a recession in that country.