Geopolitical risks and the race to some markets more emerging than others
Financial markets/economy
Posted by MoneyController on 13.08.2024
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The situation of growing geopolitical uncertainty (Iran's possible direct involvement in the Middle East, the current Ukrainian offensive on Russian territory, the prospect of increasingly tense relations between the US and China, etc.) is prompting many investors to evaluate strategies in search of value for their portfolios.
As also reported by 'Financialounge' in an article by Annalisa Lospinuso, according to the results of the Invesco Global Sovereign Asset Management Study, geopolitical tensions are now a key variable for many professional sovereign fund managers. This is shown by the fact that the asset allocation of many of these investors takes geopolitical risks into account. In particular, an escalation of armed conflicts in the Middle East and trade tensions between the US and China. On the other hand, this situation of uncertainty can also represent an investment opportunity in its own way.
The majority of respondents (mutual fund investors), i.e. 54%, believe that geopolitical tensions can benefit emerging markets. In particular, due to 'near-shoring', i.e. the shifting of production activities, so that the length of production and supply chains is reduced. In this context, debt spreads are also considered attractive compared to their counterparts in more industrialised countries.
From a near-shoring perspective, SWF investors identify Mexico and Brazil as having an advantage. This is explained by their proximity to the United States. But Asia cannot be underestimated either, according to managers, because of the huge domestic market it can count on. China, therefore, remains a very important market, even if it is characterised by non-negligible risks. But on the Asian continent, India is the preferred destination for investors consulted by Invesco's Global Sovereign Asset Management Study: 88% of the sample want to increase their investments in Indian debt.
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