Political instability in Russia could lead to market turmoil similar to that seen in Egypt during the Arab Spring, according to Liontrust’s head of emerging markets.
Eoghan Flanagan, who joined Liontrust as part of its takeover of Occam Asset Management, says the current protests in Russia over the electoral system could lead to investors pulling out of the area.
Flanagan says he reduced exposure before the recent December 4 elections – the event which caused many of the calls for political changes.
He says: “We reduced exposure to Russia two weeks ago, we were concerned about what was going on in Europe rather than in Russia.
“We’ve taken down the exposure [since] given the uncertainty and [we’re] happy to remain with very low exposure to Russia. Investors should be wary at this point.”
Flanagan says the strength of public opinion against the status quo has increased political uncertainty.
“What’s really changed over the past three weeks is Russians came out onto the streets, first of all in smaller numbers and now in greater numbers,” he says.
Flanagan says the probability of regime change in Russia has gone from 0% to 10-15% on the back of recent unrest.
Protests in Tahrir Square in Egypt and wider dissent eventually led to the overthrowing of leader Hosni Mubarak.
According to Flanagan, after Mubarak stepped down Egyptian equity markets fell by 40% and have not recovered since.
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