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Emerging markets face rising geopolitical risks

Emerging markets face rising geopolitical risks

Among the geopolitical risks that investors should be aware of in emerging markets (EMs) are US’ fresh rounds of sanctions against Russia and the US-Iran relationship.

This is according to Franklin Templeton EM experts speaking at a press briefing in Singapore.

Chetan Sehgal, director of portfolio management for Franklin Templeton Emerging Markets Equity, said Russia has one of its companies sanctioned by the US recently, which did impact market sentiments and the marketplace of those securities.

That is one risks one needs to evaluate the relationship between US and Russia, he said.

Meanwhile, Sukumar Rajah, senior managing director and director of portfolio management for EM equity, said investors should also monitor how the issue in Iran will develop.

‘While we do not expect very a big escalation there can be quite a bit of noise there emanating ahead of time,’ Rajah said, adding that the Iran issue could be a pinpoint for some of the oil importing countries. 

The US decision to pull out of the Iran nuclear deal or a ratcheting up of tensions in the Middle East as Iran and Saudi Arabia vie for greater influence could also have dire consequences for the region and investor sentiment, noted Citywire AAA-rated Coleen Barbeau.  

Barbeau is a senior vice president and the director of Global Growth Portfolio Management for Franklin Equity Group.

The development in Russia and Iran would have an impact on the EM equities.

In Franklin Templeton’s notes from the trading desk, it said global equity markets finished last week higher as concerns about rising trade tensions eased slightly.

However, a fresh round of sanctions against Russia impacted some equities with Russian exposure.

Geopolitical tensions rose, pitching Russia against the United States and its European allies. Equity markets in Asia, meanwhile, were mostly higher. Last week, Russia was one of the main influence on global equity markets.

US president Donald Trump’s additional sanctions against Russian oligarchs with ties to Putin led to a decline in the Russian rouble.

Alongside these sanctions, the ongoing situation in Syria stirred up tensions between Russia and the West. What appeared to be a poison gas attack in Douma last week prompted threats of military action from Trump and his European Allies. 

Volatility hit global equity markets hard in the first quarter of 2018, and emerging markets were certainly not immune, Franklin Templeton said.

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Related Fund Managers

Coleen F. Barbeau
Coleen F. Barbeau
82/1410 in Equity - Global (Performance over 3 years) Average Total Return: 34.75%
Chetan Sehgal
Chetan Sehgal
278/659 in Equity - Global Emerging Markets (Performance over 1 year) Average Total Return: 12.63%
Sukumar Rajah
Sukumar Rajah
157/228 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 14.41%
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