Political Risk in Emerging Markets Investing
Emerging market economies have recently been struggling with rising inflation and interest rates, and now on top of this there is increasing political risk as we see flare-ups of anti-government protests, food riots and other violence. All of this has been making investors nervous about putting more money into emerging market investments.
While political instability does heighten risk, change is not always bad or unprofitable so investors should not necessarily bail at the first whiff of political risk. As with any other investment, emerging markets should be evaluated on a case-by-case basis. It is worth noting that the Franklin Templeton fund focused on international investing has trimmed its emerging-market allocation as of late, whereas veteran international investor Mark Mobius has not been as troubled by the turmoil and continues to hold a large exposure to emerging markets.