Jan Dehn, the head of research at Ashmore Investment Management, an emerging market asset manager with €56.9 billion of assets, says that aggressive Western foreign policy is threatening the progress of emerging markets while the overhaul of the global regulatory system has helped the West to raise huge debt levels on favorable terms compared to developing countries. funds europe has quoted him as saying:
“The new regulatory system dramatically increased the risk weightings for bonds issued by countries with a lot of poor people, while keeping them at zero in countries with a lot of rich people. The result was a powerful first wave of financial repression.”
Dehn believes that the increasingly aggressive foreign policy in the West should make emerging market issuers and investors wary about future changes, such as political interference in the legal landscape, saying:
“Emerging markets countries still rely heavily on New York and English law for issuance of bonds… Debt sanctions have not yet been adopted into English or New York Law, but the idea is gaining influence and finding willing backers in the context of the Russia-Ukraine conflict.”
However, the view at Ashmore Investment Management is that emerging markets may be too strong for the West to control with Dehn saying:
“The good news is that the majority of emerging markets countries are unlikely to become pawns in this game; controlling more than 50% of global GDP with vastly better macroeconomic fundamentals than developed countries they are simply too strong to be dominated.”
To read the whole article, Will Western self-interest increase emerging market uncertainty? go to the website of funds europe.
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