Following the big rotation in developed markets, highfliers are selling off in emerging markets, too. And a second element adds to the carnage: International investors are waking up to the reality that these markets operate in more volatile political environments than their developed counterparts do. Turkey's attempt to ban Twitter and YouTube was just the most famous case.
Last year, investors crowded into emerging-market Internet companies and Macau casino operators. Pure plays were part of the attraction, but so was the perception of better corporate governance, especially in China and Russia, whose equity markets are dominated by state-owned enterprises. But companies in those big markets, too, have seen their share of political meddling.
The largest Macau gaming operators are controlled by U.S. blue-chips. But even they can't escape the big picture. "A common pattern across emerging markets is the enormous role government and big institutions play in the economies, and the poor institutional context within which businesses have to operate," says Bhaskar Chakravorti, senior associate dean at Tufts University's Fletcher School of Law and Diplomacy.
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