For this week’s News in Charts, we take a snapshot of some of the factors which affected financial risk across the world in the week ending 15 February. Using Fathom Consulting’s Financial Vulnerability Indicator (FVI), we can assess the vulnerability of 177 countries to four types of financial crisis (banking, currency, sovereign and sudden stop). The FVI is a comprehensive tool used by Fathom for client-specific research and consultancy projects. Refinitiv Datastream users can access a composite measure of the FVI on the Chartbook.
Venezuela has frequently been flagged up by our Sovereign FVI reflecting increased uncertainty about its ability to service its foreign debt. The yields of Venezuelan government debt jumped nearly 500 basis points in the week to 15 February, as investors recalibrated their expectations about the political outlook in the country. This rise, coupled with some base effects, pushed up the country’s Sovereign FVI raw probability from 8.1% to 16.8%. Bond yields in South Africa also jumped (although by a lot less than in Venezuela) as a return of the country’s electricity crisis, and the costs involved in solving this problem, spooked investors. Eskom, a publicly-backed and scandal-hit utility, has resumed imposing blackouts across the country as it struggles to supply enough electricity to meet demand. A budget was presented to parliament on Wednesday 13 February, which included US$ 5 billion bailout for the company.
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Presidential and parliamentary elections in Nigeria, scheduled for Saturday 16 February, were postponed at the last minute and are now scheduled to take place on 23 February. Nigeria is not particularly vulnerable to a sovereign crisis, according to the Sovereign FVI (ranking 92nd using own-country normalisation[1]). It is, however, more vulnerable to a currency crisis, according to the Currency FVI, where it is ranked 13th using own-country normalisation. Such a delay is not unprecedented in Nigeria — in 2011 more than 800 people died following a one-week postponement to elections that year. This latest development risks sparking political unrest, which could unsettle investors, hit asset prices and push up financial risks even though there was little change in Nigeria’s currency, or the government bond yield during the week in which the elections were postponed in 2011.
In HOUSE
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All the charts in this article have been created using Chartbook on Datastream. The Chartbook was initially created by Fathom Consulting in 2012 and is now a catalogue of approximately 9000 charts, covering over 170 countries, analysing up-to-date macro and financial data. Whether it is a particular topic, country or variable you are interested in charting, the Chartbook has everything you need. To access Chartbook via Datastream search ‘cbook’.
[1] Own country normalisation compares the current predicted probability of a crisis in a country to its historical normal predicted probability of a crisis.
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