Should you buy into corrupt countries?

Foreign investors running have been pulling out of Malaysia after corruption allegations engulfed the country. But is corruption a reason to avoid certain markets altogether?

755-corruption-chart

Return on markets ranked by corruption tendency, 2001-2014

The last few months have been a tough time for emerging markets, with the MSCI Emerging Markets index down by more than 15% in US dollar terms since late April. But one country that has been surprisingly hard-hit is Malaysia, which is traditionally seen as relatively defensive by emerging-market standards. Stocks in Kuala Lumpur are down by 7% in local currency terms, while the ringgit has slumped almost 9% against the dollar.

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Mischa graduated from New College, Oxford in 2014 with a BA in English Language and Literature. He joined MoneyWeek as an editor in 2014, and has worked on many of MoneyWeek’s financial newsletters. He also writes for MoneyWeek magazine and MoneyWeek.com.