Global Investment Risk Map: Canada the Safest, What About Indonesia and the US?

Amid geopolitical volatility, interest rate surges, and shifting capital flows, each country now presents a highly distinct risk profile and return potential, forcing market players to be increasingly selective in deploying funds. This divergence is clearly depicted in the latest map estimated by Aswath Damodaran, Professor at NYU. Damodaran measures the equity risk premium (ERP), or the additional return demanded by investors for investing in a particular country. The higher the figure, the greater the perceived risk. Conversely, countries with strong economic and political stability tend to have lower risk premiums, aligned with the returns they offer. Global Risk Gaps: From 4% to 30% Data shows a vast chasm in risk perceptions between countries. Nations in extreme conditions such as war, sanctions, and economic collapse occupy the highest risk positions, with ERP reaching around 30%. Countries like Belarus, Lebanon, Sudan, and Venezuela fall into this category, reflecting high uncertainty that makes investors only willing to enter if the returns are exceptionally high. Meanwhile, advanced countries like Canada, Germany, Switzerland, Singapore, and Sweden are at the opposite end, with risk premiums of only around 4-5%. Institutional, economic, and policy stability are the main factors making these countries regarded as “safe havens” by global investors. Europe Not Uniform, US Slightly Rising Interestingly, even in advanced regions like Europe, investment risks are not even. Southern European countries like Spain, Portugal, Italy, and Greece have higher risk premiums than Western or Northern Europe, largely due to the lingering impact of the 2009 debt crisis. Meanwhile, the United States records a risk premium of around 4.5%, slightly higher than other advanced countries. This reflects increasing market volatility and more complex domestic political dynamics in recent years. Nevertheless, the US remains in the group of countries with low global risk. Indonesia’s Position: Between Opportunities and Emerging Market Risks In this global map, Indonesia is in the emerging markets category. Emerging markets are countries with developing and liquid capital markets, and more as destinations for global capital flows. Thus, they generally have higher risk premiums than advanced countries, but lower than conflict countries. Compared to other Southeast Asian countries, Indonesia is in the middle group. The country is not as safe as Singapore, which approaches advanced country levels, but also not in the extreme risk category. Overall, the Southeast Asia region shows quite a wide variation: Singapore has a very low risk level even rivaling European countries. Meanwhile, Indonesia and some other developing countries are in the middle position. This indicates that Indonesia is still viewed as a market with growth potential. However, Indonesia must still improve economic stability, policy reforms, and investment certainty to reduce risk perceptions in the eyes of global investors. Although no ASEAN country falls into the extreme risk category like conflict zones, Cambodia, Laos, and Myanmar are the countries with the highest ERP in the region, above 10%.