The greatest opportunities for emerging market investors have always come when political chaos coincides with a dire media consensus, and a major underlying economic improvement is thereby ignored. Iraq stands firmly in this tradition of missed investor opportunities.
Precedents begin with Japan in the early 1960s, when the Nikkei fell 27 per cent following Paul Murphy’s article in the Financial Analysts Journal of May 1962, which portrayed Japan as a country on the brink of disaster. The analysis was flawed; over the next 25 years the Nikkei rose 800 per cent. A comparable slough of despond arose in 1968 when, after unsuccessful attempt by North Korean commandos to assassinate the president of South Korea, the local index fell 30 per cent. Over the following four years, it climbed fivefold, against a background of deep political uncertainty. The most recent precedent was in Russia in 1995. Despite the escalating Chechnya conflict and deeply negative media coverage of the vagaries of Boris Yeltsin, the main index rose sevenfold in two years.