You just gotta love BCA Research, by far one of the best resources and they have a free blog. I’ll post here what I find interesting such as the below article, and it brings across a fairly simple point:
- SE Asian countries already went through the debt issues in the late 90s hence why the region’s countries have clean balance sheets and are not burdened by debt like the western world
The Debt Supercycle is on its last legs in the developed world, but investors should not look for a full-on migration to the developing world.
The supercycle could not have become entrenched in the G7 if policymakers did not believe that it worked. A simple comparison of year-over-year changes in private indebtedness with year-over-year changes in nominal GDP growth suggests that it did: increased borrowing was associated with expansion across the G7.
Developing world officials wishing to replicate the supercycle in their own countries would be abetted by currently light debt burdens. Emerging economy balance sheets are relatively pristine compared to developed economy balance sheets, with narrower budget deficits helping to keep them that way. But more credit-reliant economies in EM are not a foregone conclusion.
As a group, emerging economies lack the income, infrastructure and credit culture to make full use of their apparent capacity. Moreover, the leading emerging markets need time to digest the acceleration in the rate of credit expansion that has already occurred. Investors should nonetheless expect financial deepening and an expansion of social safety nets as developing world wealth increases.
Long-term investors can best position for the waning of the supercycle in the developed world, and financial deepening in the developing world, by increasing exposure to emerging market financials and health care equities and debt.
Source: BCA Research