Egyptian Unrest Renews Fears Over Political Risks Of Investing In Emerging Markets

Tuesday, February 01, 2011 07:30
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Egyptian Unrest Renews Fears Over Political Risks Of Investing In Emerging Markets

Tags: world economy

As investors became more comfortable with the global economy in recent years, investing in developing countries grew more popular and seemingly less risky. Events in Egypt have changed that by reminding investors how fragile the political situation can be in some regions.

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Reuters analyses how political unrest in Egypt is boosting food and fuel prices and renewing fears about political upheaval in countries that have become popular investment targets.


On a practical level, investments in emerging economies will probably become more expensive as investors demand a higher risk premium. Some investment funds clearly will flow away from emerging markets and into other sectors, as well.


In the meantime, Standard & Poor’s and Moody’s cut Egypt’s credit rating, and some investors already are betting on a comeback in the Egyptian economy.
 

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