Political Risk Latin America Blog @PolRiskLatam

EM investors ignore political risk at their peril

Posted in News and Articles, Political Risk by politicalrisklatam on June 9, 2011

by Financial Times – Beyond Brics, June 7th, 2011.

In an age of CDOs, CLOs, MBS and ETFs, it easy to overlook the wild card of political risk in emerging markets.

But as Stefan Wagstyl, the FT’s emerging markets editor argues in Wednesday’s paper, Ollanta Humala’s victory in Peru’s presidential election this week is a stark reminder that political risk, apart from being extremely difficult to measure, is very real.

He writes:

Given the left-wing Mr Humala’s late surge in opinion polls, investors should perhaps have been prepared for the possibility of the left-wing populist’s narrow win over conservative Keiko Fujimori.

But the result came as a shock, knocking a record 12.4 per cent off the Lima stock market on Monday, spreading turmoil in the bond and currency markets, and fuelling what one Peruvian academic called “panic in the middle and upper classes.” (continue reading…. )

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