It is remarkable that the bulk of the bond issuance over the past year from emerging markets comes from Asia. We suspect the bulk of this is from the private sector.
In discussions about potential bubbles, emerging market corporates is increasingly cited as a risk. Past crises have been proceeded by an accumulation of foreign currency debt.
The IMF recently warned that the bond market rally in Europe may be getting ahead of itself and is especially vulnerable as US rates begin to rise. That cautionary note seems applicable to the emerging markets too, even if some countries have build substantial reserves. Traditionally, investors and economists looked at reserves relative to imports. After the 1997-98 Asian financial crisis, reserves were also in the context of short-term debt obligations. Now it seems many observers and policy makers are including a third metric: the amount of hot money that has entered the country.