Be Wary of State-Owned-Enterprises
Foreign governments aren't always on your side.
A version of this article previously appeared in the August 2019 issue of Morningstar ETFInvestor. Download a copy here.
Developed markets like the United States, Europe, and Japan are relatively safe from a governance perspective. Publicly traded corporations in these markets are allowed to run their businesses relatively free from direct government intervention. Emerging markets like China and Russia are a different ball game. Countries like these are home to large state-owned-enterprises: publicly traded firms partially owned by the governments in their home markets. This ownership structure is a source of risk because governments may pressure these firms to prioritize government interests over those of other shareholders.
Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.