The line between economics and politics in emerging markets (EM) is becoming increasingly thin, particularly in countries with weaker institutional structures and stagnating growth. With several EM countries facing elections in the next 12 months, Eric Spencer, Senior Research Analyst on our Global Emerging Market Equities team, weighs in on potential risks and opportunities. 1. Which elections are you watching most closely, and what implications could they have for EM investors? We track political risk to help us assess the potential impact on foreign exchange, local-currency asset prices and ..read more

Recent G-7 discussions about imposing caps on the price of Russian oil and gas have led to some head-scratching. We see several angles at play in this situation. Below are some thoughts from a political economy standpoint. We are concerned the risk of policy error could be high here. 1. It is far from clear that Russia would play along since it has probably been a net earner of foreign exchange (FX) since the war began. According to Finnish think tank Centre for Research on Energy and Clean Air (CREA), Russia earned €93 billion from fossil fuel exports (including coal) in the first 100 days of ..read more

China and Russia have long had a common interest in undermining the US-led global order, in my view. Russia’s war against Ukraine has added to the tensions surrounding China’s already fragile relationship with the West. Many investors are wondering how China will manage these strategic relationships as the war continues. Below, I share my views on China’s geopolitical balancing act through the lens of President Xi Jinping’s agenda. 1) Where does China stand on Russia’s war with Ukraine? Uncomfortably in the middle. So far, Beijing has not condemned the invasion of Ukraine or joined the West i ..read more

Last week, we outlined three possible scenarios for the Russia-Ukraine conflict and their implications for financial markets. Unfortunately, Russia’s invasion of Ukraine has made the full invasion scenario a reality. While the geopolitical and humanitarian picture is grim, the market response has been surprisingly modest so far. Our longer-term outlook depends on the length and severity of the conflict, but we expect a fairly protracted situation. Below, we share our updated thinking on some key variables. We believe the conflict will add to the inflationary environment and impose a tax on gl ..read more

Rising tensions between Russia, Ukraine and NATO[i] have the world on edge, and many investors appear to be concerned. A major geopolitical event can send shockwaves through financial markets. However, predicting the behavior of global leaders can be difficult for even the most seasoned foreign policy experts. Here, we look at three scenarios and how those potential outcomes could impact financial markets. A frozen conflict Russia, Ukraine and NATO could stay in a frozen conflict, with no party making a move that would significantly escalate the situation. We think this scenario would maintain ..read more

China’s recent blitz of education, technology, property and gaming regulations has triggered a cascade of knock-on effects in global markets. Chinese assets in targeted sectors have experienced volatility since the government announced new regulations. Now, tighter policy restrictions have put highly levered Chinese property developer Evergrande in a liquidity crunch. Contagion fears have spilled into global markets. For many investors in the emerging market universe, China’s policy moves have raised concerns. Some might be wondering—what’s China’s endgame? Have the government’s shifting polic ..read more

On 6 May, Scotland will hold parliamentary elections that could ramp up the push for a Scottish independence referendum. Support for Scottish independence is substantially stronger than it was before the 2014 referendum, and polling generally indicates a strong likelihood of a pro-independence majority. We believe this event and the prospect of another independence referendum could introduce market volatility. The issue also draws the market’s attention to the general prospect of a country leaving a currency regime—and what that might mean for Europe. The potential (rocky) path to a referendum ..read more