The two countries are in the top eight of 40 developing nations on all three measures adopted by S&P to assess liquidity risk.
These include factors related to the need for external financing, size of short-term foreign debt and current-account deficit, one of the broadest measures of a country’s economic health.
“The larger an economy’s dependence on external funding is compared to its own stock of and capacity to generate foreign reserves, the more vulnerable it is to a change in the extraordinarily loose monetary conditions currently prevailing worldwide,” S&P’s analysts Moritz Kraemer in Frankfurt and Frank Gill from London said in an e-mailed report today.
Investors withdrew a record $5.7 billion from emerging-market debt funds in the week through June 26 after Federal Reserve Chairman Ben Bernanke said he would cut back stimulus as the U.S. labor market improves, EPFR Global data compiled by Morgan Stanley show.
Turkey, formerly among the top destinations for developing nation funds, has seen more than $1.4 billion in outflows from its stocks and bonds in June, after protests broke out against Prime Minister Recep Tayyip Erdogan’s government at the end of May.
Turkey’s benchmark stock index dropped 11 percent in June, the steepest monthly retreat in almost two years, and the lira weakened to record low on June 24.
Investors in Turkey’s dollar bond due in 2023 lost 9.6 percent last month.
Ukraine’s 2023 bond lost 9.7 percent since it was sold in April this year.
The former Soviet republic, which is still seeking to renew a lending program with the International Monetary Fund, may sell foreign debt for a third time this year should yields decline, Serhiy Arbuzov, first deputy prime minister, said on July 1.
Ukraine has raised $2.3 billion by tapping international markets this year as monetary easing in developed nations drove demand for higher-yielding assets in emerging economies.
“The current market volatility is a reminder that the benign financing conditions currently enjoyed by most emerging market debtors may not last indefinitely,” S&P said in the report.
Countries in Asia and Latin America are relatively less vulnerable to external liquidity risk, it said.