Page 25 - ARUBA TODAY

BUSINESS Monday 12 March 2018
A25

Of Mutual Interest:

Politics could matter to emerging-market investors this year

By STAN CHOE between nuclear-armed
AP Business Writer North Korea and the Unit-
NEW YORK (AP) — All poli- ed States. The year before
tics may be local, but inves- that, though, politics mat-
tors around the world still tered when the United
need to care about them. Kingdom’s vote to leave
There are high-stakes elec- the European Union shook
tions on the calendar this markets around the world.
year beyond the midterm Even with the increased
elections for the United possibility of election-relat-
States, including several ed turbulence, many fund
across emerging mar- managers say they remain
kets, stretching from South optimistic about the pros-
America to Asia. Regard- pects for emerging mar-
less of how the results pan kets. Emerging economies
out, emerging-market are in better fiscal shape
stock and bond funds may than they were before
swing widely in the interim prior downturns, and their
following their stellar and stock and bond markets
nearly uniformly upward are typically less expensive
ride in 2017. than markets in the United
Higher highs and lower lows States. U.S. markets have
are nothing new for emerg- A woman wearing headphones, listens to an appellate court ruling on a corruption conviction led the world for years,
ing-market funds, which against ex-President Luiz Inacio Lula da Silva in Rio de Janeiro, Brazil. Concerns are high that which has many investors
invest in stocks and bonds Brazil’s presidential election could hinder efforts to reform the country’s pension system and make calling foreign markets
from China, Brazil and other fiscal changes. more attractively priced.
other developing coun- (AP Photo/Silvia Izquierdo) Plus, the gap between the
tries. These economies are 22 percent return for S&P United States. for the North American developed and emerg-
growing at a faster pace 500 index funds. For this year, much atten- Free Trade Agreement. ing worlds may be slim-
than the developed world, The eye-popping figures tion is on elections coming Concerns are also high that ming when it comes to how
which can mean bigger helped convince investors up in Brazil and Mexico, Brazil’s presidential election much of a risk politics can
profit possibilities for their to pour more than $50 bil- which are two of the larg- could hinder efforts to re- play. In the United States
companies and higher lion into emerging-market er components of many form the country’s pension and elsewhere in the de-
yields for their bonds. They stock funds during 2017, just emerging-market funds. system and make other veloped world, one of the
also have a history of crash- two years after they pulled Together, they make up fiscal changes. Brazil only main causes for anger is
ing more than the U.S. mar- more money out of such about 10 percent of the recently emerged from a the growing inequality be-
ket when trouble strikes, funds than they put in, ac- MSCI Emerging Markets in- punishing recession. tween the rich and every-
such as during the 2008 fi- cording to Morningstar. dex. Investors have gone back one else.
nancial crisis. Those investors got a re- In Mexico, the front-run- and forth in recent years In the emerging world, the
Many investors, though, minder of the potential ner in the July election for on whether it’s worth car- opposite is happening, said
may have taken their first volatility in recent weeks, president is Andres Manuel ing about politics. Last Samy Muaddi, portfolio
step into emerging markets when emerging-market Lopez Obrador. Some in- year, the answer seemed manager at T. Rowe Price.
recently and experienced stock funds lost just as much vestors worry that a Lopez to be “no,” as markets reg- Middle classes are expand-
only the good times. Last as S&P 500 index funds dur- Obrador victory could lead istered only minor hiccups ing in many emerging
year was an exceptional ing the sell-off in late Janu- to a rollback of market- when Catalonia declared markets, with wages rising
one, and emerging-market ary and early February, friendly policies or of more independence from Spain and more people owning
stock funds returned an av- even though the trigger for acrimonious negotiations and rhetoric got heated property.q
erage of 34 percent. That the market’s fear was an
towered over the roughly economic report out of the