Dear Redditors,
I have a question for those of you with experience investing in stock markets of developing countries. Perhaps you reside in one of these countries and possess firsthand experience in your day trading activities. Specifically, I'm referring to countries grappling with significant inflation rates and erratic currency fluctuations. How do you perceive investing in stocks in such countries in terms of risk assessment, ranging from mild to a stay-away level?
For instance, the Argentine Peso experienced a consistent increase in exchange rates from January to mid-August, going from approximately 180 to about 280. During the same period, the MARVEL index surged from around 200k to roughly 550k, representing a gain of about 175%. However, the devaluation of the currency by the government from approximately 280 to about 350 after mid-August was far from favorable.
A similar scenario unfolded in Turkey. From July to almost the end of September, the currency depreciated from 25.80 to 27.20, indicating a 5% loss in its value. Conversely, the BIST index witnessed an upward trend, rising from about 6k to roughly 8.2k, marking a 36% increase.
In both these countries, one can observe a pattern in the exchange rate behavior where it remains steady for a while, experiences sudden spikes, plateaus, and then stabilizes for a period before spiking again. It's as if the government decides to adjust the bar a little higher one morning while sipping their coffee—of course, the reality is more complex. The point is the highly unpredictable nature of the risks involved. How do investors manage these risks in such countries?
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