Emerging Markets Masking Corporate Foreign-Debt Levels, BIS Says – Bloomberg.
Foreign-debt levels of companies in emerging markets from China to India and Brazil are underestimated, threatening financial stability, the Bank for International Settlements said.
Companies are raising more foreign funds through their offshore affiliates and accounting practices understate the currency risk in such transactions, the Basel, Switzerland-based institution said in its quarterly report. Almost half of the $554 billion that the firms raised in the five years through 2013 came from the affiliates, the BIS said.
“Offshore subsidiaries of emerging-market non-financial corporates are increasingly acting as surrogate intermediaries,” raising money abroad and transferring it to their parent companies, economists led by Stefan Avdjiev wrote. “This trend could have important financial-stability implications. Yet, analysis of it is hindered by conceptual difficulties associated with statistical conventions on the measurement of cross-border flows.”
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