Stephen Roach says Russian default would hit emerging markets — and China

cnbc.com:

Economist Stephen Roach warned effects from any default on Russia's sovereign debt as a result of the Ukraine crisis would spill over to emerging markets, including China.

«If Russia does default on its debt… there will be broad spillover effects to sovereign debt in emerging markets around the world and China will not be unscathed from that,» he told CNBC's «Squawk Box Asia.» «But I'm talking really of broader risks — guilt by association.»

Roach, a senior fellow at Yale University, added that «China cannot afford to stay in close alignment with Russia as it mounts this truly God-awful campaign against innocent Ukraine right now.»

«And the sooner China breaks with Russia, the better — and we'll have to wait and see and watch that very closely,» he said.

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Shortly after Moscow launched its assault on Ukraine, the U.S. announced sanctions on Russia's sovereign debt as well as its banks and central bank. Since then, major ratings agencies Fitch, Moody's and S&P have slashed the country's sovereign rating to «junk» status, saying Western sanctions could undermine Russia's ability to service its debt.

China has saidit won't participate in those sanctions against Russia.

Meanwhile, major global index providers MSCI and FTSE Russell announced last week that Russian stocks will be pulled from all their indexes. MSCI also announced that it will be reclassifying its MSCI Russia indexes to «standalone markets» rather than emerging markets.

London-listed Russian stocks