Emerging Markets To Face A Highly Political 2014

As the tidal wave of global central bank liquidity recedes in 2014, emerging market investors are growing more anxious about local political risks – and how to spot them early on.

Developing economies have had a rough ride since the Federal Reserve first mooted a wind-down of its money printing last year. The looming withdrawal of easy cash worldwide pushed the dollar and Treasury yields up and drove Western investors home, jarring countries most dependent on foreign capital.

Emerging market bonds posted only their third year in the red since 1998 last year, while emerging equities ended 2013 in the red for the second year in three.

And as the global investment tide sweeps out, it may reveal a beach strewn with political detritus.

As competition for funds hots up while their economies rapidly lose steam, political risks have been amplified in the so-called ‘Fragile Five’ of Turkey, South Africa, India, Indonesia and Brazil, the emerging economies with the biggest overseas financing needs.

All five face elections this year, adding to brewing local concerns over a deepening corruption probe in Turkey or the waning popularity of South Africa’s and Brazil’s leaders.

South Africa and India hold parliamentary elections in 2014, while Brazil and Turkey have presidential elections. Indonesia has both. In fact, 12 of the major emerging markets go to the polls in some format this year.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza