Country Risks
While recent instability in emerging economies heightens, Korea recorded the lowest country risk among 30 key emerging countries.
On September 12, Hana Institute of Finance released a report titled “Analysis of Instability in Emerging Markets and Country Risk” in which it indexed economic, financial, and political country risks in 30 key emerging economies. Korea was reported as the most stable market.
According to the report, Korea’s country risk index was at 2.6, the lowest of the 30 countries. It was followed by Saudi Arabia (2.7), India (2.7), China (2.8), Nigeria (2.8), and Indonesia (2.9).
“While some emerging markets are shaken, Korean economy is differentiated by its relative stability and immunity,” explained the Institute. With limited possibility of systematic crisis, overall investment confidence will continue upwards.
Non-Asian countries had relatively high country risk index with Ukraine at 6.6, followed by Venezuela (5.3), Hungary (4.9), Turkey (4.7), Morocco (4.6), Poland (4.6), Czech Republic (4.5), and Romania (4.3).
“Recent instabilities in Asian emerging economies such as India and Indonesia can be considered an event in the financial markets. This is the result of portfolio adjustments in response to the US exit strategy and cannot be seen as a systemic crisis,” argued the Institute.
As US seeks exit strategy, possibility of lowered liquidity has risen in the global markets. A few emerging economies with high dependency on foreign capital and weak economic foundation has higher instability. But by country risk alone, Eastern Europe, Central America, and South America has higher risk than the Asian countries.
“Recent instabilities in emerging economies cannot be seen as systemic crisis led by country risk or shocks in the international system. Instabilities in emerging markets that follow asset adjustments will continue to ease,” said Bo-hyung Jang, Head of Economic Research at Hana Finance.