Sovereign Risk Ratings Q108

BMI View: Long term, we believe that the external debt fundamentals of emerging Europe will continue to improve. Growth rates, although declining from 2007's highs, will be fair, while there is no immediate need for governments to start borrowing large sums abroad. Threats come from a less favourable global environment, and the large debts that have been built up by many banking sectors. Against this backdrop we are broadly positive on CEE credit. We believe that the spike in CDS contracts has gone too far, and think Kazakhstan is the pick of the bunch as far as short-term compression is concerned.

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