Emerging markets rally as Turkey, Egypt, and Nigeria receive positive financial outlooks

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on May 6, 2024
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  • Turkey's five-year credit-default swaps dropped to their lowest level since February.
  • In Egypt, Fitch Ratings improved the country's credit rating outlook from stable to positive.
  • The favorable shifts in credit ratings and outlooks for these countries are likely to have broad implications.

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Emerging markets in Turkey, Egypt, and Nigeria experienced a surge following favourable adjustments in their credit ratings and economic outlooks, signalling increased investor confidence and potential economic stability in these regions.

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Turkey’s credit upgrade fuels optimism

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Turkey’s financial market showed positive movement after S&P Global Ratings upgraded the country’s sovereign credit rating.

The upgrade was attributed to the government’s shift back to more orthodox economic policies, which have likely reassured investors about Turkey’s economic direction.

Consequently, Turkey’s five-year credit-default swaps, which represent the cost to insure Turkish debt against default, dropped to their lowest level since February, indicating reduced perceptions of financial risk.

Egypt’s outlook improvement and international support

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In Egypt, Fitch Ratings improved the country’s credit rating outlook from stable to positive.

This upgrade came on the heels of Egypt securing an international bailout, which appears to have bolstered market confidence in its financial health.

Following this announcement, Egypt’s dollar notes due in 2047 surged to their highest value in over three weeks, reflecting a robust response from the bond market to the positive news.

Impact on regional and global markets

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The favorable shifts in credit ratings and outlooks for these countries are likely to have broad implications.

Improved sovereign ratings often lead to lower borrowing costs and can attract more foreign investment, which is vital for the economic growth and development of emerging markets.

The positive news from Turkey, Egypt, and Nigeria not only benefits these individual economies but also contributes to greater stability and confidence in regional markets.

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