A lack of transparency and sound data remain huge challenges in many emerging markets. So how should investors assess the risk of investing in emerging markets given the inefficient access to information? How does ‘economic transparency’ affect asset prices? The panel discussed the link between governance principles, asset prices, trust in government and investment volatility and what investors can do about it.[vc_quotes layout=”accordion” 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Key takeaways
Sovereign transparency helps improve the value of assets, enables countries to lower their borrowing costs and achieve a better credit rating.
The discount rate on assets shrinks as transparency improves resulting in assets going up in value.
Key points that help sovereign transparency include economic data being published in English and regularly updated.
Economic development and transparency are linked, making transparency crucial for emerging markets.
Transparency does not create more volatility but higher levels of sovereign transparency don’t necessarily increase levels of trust in a government.
Some countries (like Ukraine) have relatively high levels of transparency, but struggle to subsequently enforce rules and laws to deal with the challenges transparency reveals.
Asset owners have an important role in engaging on transparency.
Swedish buffer fund AP1 uses a corporate scoring process whereby more transparency increases a company’s weighting in its index investment.
AP1 has begun excluding fossil fuels from its entire exposure. The process has included launching some new funds and strategies with managers.
The decision was based on the fund’s climate and scenario analysis and the financial risk posed from fossil fuel groups.
In many cases, companies have the data investors want disclosed, but are often not aware of it.
The big difference between the vaccine rollouts and the scale of the stimulus measures across the world could result in a K-shaped global economic recovery, with much of the developed world booming but poorer countries continuing to struggle. However the
Innovation in data transmission and renewable energy, a reopening economy and historic policy support are combining to create attractive infrastructure opportunities for investors looking to build more resilient portfolios.
Emerging market assets perform well in an environment of rising inflation and strong growth, even when yields are going up and developed market economies are outperforming.
The COVID-19 pandemic has disrupted lives the world over for more than a year. Its death toll will soon reach three million people. Yet the origin of pandemic remains uncertain: The political agendas of governments and scientists have generated thick clouds of obfuscation, which the mainstream press seems helpless to dispel.
The IIF provides ongoing, cutting-edge analysis of international capital flows. Our flagship products are the Capital Flows to Emerging Markets Report (twice a year), the monthly Capital Flows Tracker, and our various proprietary capital flows databases. In addition, we occasionally produce one-off research notes on topical issues.
The shortfall in global COVID-19 vaccine production could be closed if manufacturers around the world were granted access to the necessary technology and knowledge.
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