While corporate debt is on the rise globally as liquidity abounds, leverage1 of listed non-financial companies is comfortable at 53%, a -3.2pp decline vs 2016, but this masks a very wide range and areas of high risk.
- We see risk as highest in paper, transportation and textile sectors, all of which are exposed to structural challenges and some of them ad-ditionally to rising commodity costs, tightening regulations and risk from protectionism.
- We note great improvement in the resource sectors. They have slipped off the red mark of our highest risk sectors, curtesy of the earnings uplift from great commodities recovery.
- Southern Europe features at the high end of the risk spectrum, with Portugal showing the highest average net gearing with 96%, Spain 69% and Greece 68%. Corporate gearing is also elevated in Turkey with a ratio of 72%. The safest countries according to our average net gearing indicator are South Africa (38%), Australia (41%) and Hong Kong (42%).