Corporate debt: without crying wolf- mind them
While corporate debt is on the rise globally as liquidity abounds, leverage of listed non-financial companies is comfortable at 53%, a -3.2pp decline vs 2016, but this masks a very wide range and areas of high risk.
We see risk as highest in paper, transportation and textile sectors, all of which are exposed to structural challenges and some of them additionally to rising commodity costs, tightening regulations and risk from protectionism.
We note great improvement in the resource sectors. They have slipped off the red mark of our highest risk sectors, curtesy of the earnings uplift from great commodities recovery.
Southern Europe features at the high end of the risk spectrum, with Portugal showing the highest average net gearing with 96%, Spain 69% and Greece 68%. Corporate gearing is also elevated in Turkey with a ratio of 72%. The safest countries according to our average net gearing indicator are South Africa (38%), Australia (41%) and Hong Kong (42%).