Geopolitics trumps local events in frontier financial markets

Headlines in the past month have been dominated by local political events in frontier markets. In Venezuela, violent mass protests have swept the country. Meanwhile, the victory of Serbia’s Prime Minister Aleksandar Vucic in presidential elections has added to fears that he is trying to consolidate power. However, financial markets in these countries have weathered the political uncertainty well. Yields on Venezuelan dollar bonds fell after state-owned PDVSA managed to scrape together enough funds to make a large US$2bn principal repayment on its dollar bonds. And the Serbian dinar has strengthened against the euro.