Displaying items by tag: Turkey

Thursday, 16 August 2018 08:54

Emerging Markets are Entering a Full Blown Crisis

(Istanbul)

Most sources, including FINSUM, have been concluding that the emerging markets flare up centered on Turkey, would not develop into a correction or financial crisis for developed markets. Today that position is looking weaker, as stocks fell sharply across the world yesterday, and commodity markets got routed. Emerging market stock indices have fallen back into a bear market. While EMs fell big, global markets saw share plunges exacerbated by a dismal earnings report for one of China’s big tech companies, which then seeped into tech shares globally.


FINSUM: The narrative here is that Turkey sparked a big selloff and now fears over China will continue to drag EMs down. This could be the start of a global recession, but perhaps it will not be accompanied by huge losses in developed markets.

Published in Eq: EMs
Wednesday, 15 August 2018 08:52

Turkey Won’t Start a Financial Crisis

(Istanbul)

A lot of investors are worried that the turmoil in Turkey could spark a global financial crisis. In particular, Turkey’s weak position could spread to European banks, letting the situation balloon from there. However, the reality is that such fears are overblown, according to a credit analyst. Europe’s banks are actually in a strong position and can absorb losses from Turkey, so there does not seem to be any contagion to spread. Turkey’s problems are largely self-inflicted and unique as well, so it is hard to see all EMs succumbing to the panic.


FINSUM: From an American investor’s standpoint, the Turkey situation should not be very concerning as it does not seem to have much direct relationship to the US economy or markets. Hence our shares rising while Europe’s are falling.

Published in Eq: EMs
Tuesday, 14 August 2018 08:22

Will There Be an Emerging Markets Crisis? No

(Istanbul)

Investors may be watching the markets anxiously, and with good reason. Turkey is in the middle of a full blown financial crisis, and the threat of it leaking into western markets via European banks seems tangible. Emerging market stocks are down 18% from their peak in January and there is pressure on other EMs like South Africa, China, Russia, and India. However, the worries over a full-scale emerging markets meltdown seem overdone, especially considering the economies of EMs are actually quite strong and healthy at the moment, which should keep things from falling into dire straits.


FINSUM: EMs currently have good currency reserves and many are running budget surpluses, so they are not entering this period of turmoil in weak shape.

Published in Eq: EMs
Friday, 10 August 2018 08:31

EMs: Turkey Enters Full Blown Crisis

(Istanbul)

Following a diplomatic spat with the US that has thrust Turkey into an economic tailspin, the country is entering full-blown crisis mode. Turkey’s Lira is down more than 35% this year and fell another 5% overnight. Bond yields are soaring alongside the losses, with the country’s ten-year yielding over 20%, a move exacerbated by Istanbul’s large budget deficit. The crisis is going so badly that the EU is seeking to limit the Eurozone’s banks from exposure to Turkey’s meltdown. BBVA, UniCredit, and BNP Paribas have the most exposure to Turkey.


FINSUM: There is no end in sight to the selloff. The big hope is that Turkey is supposed to unveil a new economic model today that will show how it plans to cut debt and shrink its budget deficit. That would be a start.

Published in Eq: EMs
Tuesday, 07 August 2018 14:22

Big EM Debt Selloff Beginning?

(Istanbul)

There is a big mess going on in Turkey. The country’s spat with the US is playing out in financial markets, and it is really starting to hurt. The Lira is dropping fast, and the country’s benchmark bond yield just hit a whopping 20%. The huge losses in the currency and bond market might also lead to a rout and/or chaos in the country’s banks, which are now only weakly capitalized.


FINSUM: It is important not to muddle Turkey with other emerging markets, as many of its problems are specific to itself. Still, there are similarities and a renewed widespread selloff does not seem out of the question.

Published in Eq: EMs
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