Big emerging-market companies worry investors

, when a botched budget in Britain roiled markets enough to threaten giant pension funds, investors have been looking for other vulnerabilities that might cause markets to break. Emerging economies are a prime candidate. Historically, high American interest rates and a soaring dollar have triggered financial instability across the developing world. A few unlucky places, including Argentina and Sri Lanka, have stumbled into crisis this time round, but many emerging-market governments have deeper foreign-exchange reserves and less dollar-denominated debt than before, and thus look much sturdier than even a decade ago. Big firms in these countries are a different story. Debt issued by large companies has risen relentlessly since the turn of the millennium—from just over 60% of emerging-market in 2000 to more than 90% on the eve of the covid-19 pandemic—as firms took advantage of low interest rates. Borrowing then jumped a further ten percentage points in 2020 alone. Much of this money is owed to foreigners. Although governments in emerging economies began to borrow in their own currencies after blow-ups in the 1990s, corporate debt is still mostly denominated in foreign currencies, meaning local-currency depreciation leads to a deterioration in companies’ balance-sheets.