Emerging market (EM) corporate bonds have been dealing with a surging U.S. dollar, a collapse in global energy prices, and a likely hike in U.S. interest rates, which are underscoring growing liquidity risks, according to a new report from Fitch Ratings published on Thursday.

The rapid appreciation of the U.S. dollar, potential hikes in U.S. interest rates later in 2015 and the collapse in global energy prices have all led Fitch Ratings to look more closely at liquidity in emerging market corporate bond markets. The purpose of this report is to highlight potential liquidity risks EM bond investors face, as well as the concentrated geographical and industry exposures in the dollar-denominated corporate EM bond market.

According to the report from Fitch, a lack of trading activity among emerging market corporate bonds could trigger increased price volatility during times of market distress or even hinder companies’ ability to refinance their debt.

Since the global financial crisis, corporations from emerging market economies — particularly Russia and Brazil who account for 62 percent — have been increasingly tapping capital markets to issue bonds, in order to raise cheap capital and take advantage of investor demand for yields, as the market has tripled over the past five years to $1.4 trillion.

Despite the growing market for EM corporate bonds, the frequency of trade for them has plummeted in comparison to U.S. high-yield bonds as tighter financial regulations have prompted banks to cut their role as EM market makers which has thus left a void from where they used to be readily available to buy and sell when orders come.

The trading frequency gap between U.S. [high-yield] and dollar-denominated emerging market high-yield [bonds] indicates that any significant increase in market volatility could lead to liquidity disruptions for emerging market bonds. In a period of market stress, heavier volume and crowded trades in relatively illiquid bonds would likely contribute to further volatility. The breakdown of emerging market high-yield corporate issues by industry in our sample indicates that energy and financials dominate, with 22% and 32%, respectively. These shares stand in contrast to the mix of U.S. high-yield names, which are led by communications and consumer (non-cyclical) companies (23% for each). Energy companies comprise 15% of the top U.S. high-yield issuer sample. 55% of the top U.S. high-yield bonds traded on more than 95% of trading days. Only 18% of high-yield emerging market issues fell into that category during our survey period (from June 30, 2014 to March 31, 2015). A much higher percentage of emerging market bonds (41%) changed hands on less than half of trading days (compared with 1% of U.S. high-yield issues).

The lack of liquidity contributed to a selloff in emerging market assets in May 2013 following the U.S. Federal Reserve’s signal that it may withdraw monetary stimulus.

The shortage of willing buyers and sellers of EM corporate bonds may have further implications on the sector’s credit profile, Fitch warned. “An extended period of market volatility could make it more difficult for EM issuers with weak credit profiles to refinance significant debt maturities over the next few years.”

An extended period of market volatility could make it more difficult for emerging market issuers with weaker credit profiles to refinance significant debt maturities over the next few years. As dollar-denominated obligations roll off, many high-yield emerging market companies may find it more difficult to gain market access if investors increasingly demand larger risk premiums to compensate for reduced market liquidity.

EM borrowers tend to concentrate in a small number of countries and industries, which further raises the risk of a market stampede when investors exit, Fitch said.

Brazilian and Russian companies account for over 60 percent of EM borrowers, while financial and energy firms make up 54 percent, according to Fitch.

“In a period of market stress, heavier volume and crowded trades in relatively illiquid bonds would likely contribute to further volatility,” Fitch said.

The survey from Fitch covered 100 of the largest high-yield corporate issues in the U.S. and emerging markets, providing a rare glimpse into the opaque corporate bond market, where the bulk of transactions occur in over-the-counter markets.