EM Chartbook -Corporate vulnerability monitor

We argued in our last EM chart pack on Sep 20that investors often get toobogged down by the Fed & Fund flows. While these factors are clearly veryimportant drivers of EM risk, we believe the improving growth outlook, highercommodities, low corporate defaults, etc. deserve an equal mention. In fact,our EM strategists have taken a fairly constructive view on fixed income assetsin their outlook report published on Dec 1. Yes, the Good vs. Bad EM themewill likely be more important than ever in 2017. With that in mind, we havecome up with a country level vulnerability monitor for EM corporates. We doagree that each company is different and this exercise doesn’t take away theneed for bottoms-up analysis. However, at the country level, we find EMcorporates in Indonesia, Peru and Russia as least vulnerable and the ones inBrazil, China and Mexico as comparatively more vulnerable, purely on afundamental basis. The analysis doesn't take into account technical factors(like the strong local bid for China) and valuations (one could argue that Brazil'svulnerability is already priced in).