Contagion of Middle East crisis could cause global shockwaves

ON EMERGING MARKETS

Schroders' Allan Conway says if the unrest spreads to large countries in the region, the impact on global equities will be more significant.

The emerging world recovered strongly from the global credit crisis owing to strong fundamentals and domestic demand-driven growth. However, inflationary pressures have increased in several EMs, leading to policy normalisation and tightening measures in some cases. Together with recent political unrest in parts of North Africa and the Middle East, this has led to some stock market weakness year to date.  While policymakers in the emerging world will be keen to avoid the build-up of asset bubbles, they are unlikely to allow policy tightening to destabilise a sustainable recovery in the...