A series of elections are due in emerging markets in 2014, which could impact policies and markets materially. Dhiren Shah, manager of the BGF Emerging Markets Equity Income Fund, says dividend investing could help manage the potential volatility and harness the growth.

Elections matter, wherever they are in the world. But they tend to have a much larger impact in countries in the early stages of development, like India. Political cycles and the decisions that follow can have dramatic impacts on these economies, which are rich in potential but require continual reform to enhance productivity, raise GDP and support sustainable long-term growth. That’s especially true given their growth rate has slowed from 7% in 2010 to around 4.5% today*.

On an electoral roll

The EM election calendar is very busy this year, which could create a very different political landscape by 2015 and provide real opportunity for EM investors. Markets are forward looking, so policy statements and electoral polls will be followed eagerly.

EM elections tend to follow a similar path. Difficult decisions and issues, including reform, are addressed in the first 12-24 months of a new term, but little is accomplished thereafter. Just look at the potentially transformative reforms announced in China and Mexico late last year to see what might happen. These reforms could send a very powerful signal to other countries and help shape the future direction of EMs.