Strangely enough, data show that dictatorships tend to produce outsize returns for emerging-market debt investors.
Venezuela and Poland Pay
Venezuela has expropriated more than a half dozen foreign companies and is by some estimates caught in its own period of hyperinflation. Yet it continues to make good on foreign debt payments and boasts the world’s top stock index. (Caveat: most traders are locals desperate to hedge against the bolivar’s record collapse in the black market, and international investors would have almost no chance of getting their money out of the country at the official exchange rate.)
Poland, home to this year’s second-best stock rally, has a populist president of its own: Andrzej Duda. While his heavy-handed methods have aroused protests, including formal declarations from the EU, Duda’s party remains widely supported by Poles, largely due to the nation’s steady economic growth.
"Populist leaders tend to, by definition, do things which are popular with the masses, often by way of giveaways," Tony Hann, the head of equities at London-based Blackfriars Asset Management Ltd., who is overweight the Philippines. "This leads to improved sentiment and stronger consumer spending, which can be powerful drivers of markets."
This article was provided by Bloomberg News.