Turkey in a hole of its own digging
August 15, 2018

Turkey is now in a hole it has been feverishly digging for the last few years. This is the view of Kim Catechis, Head of Global Emerging Markets at the Legg Mason affiliate Martin Currie in a short note on the turmoil unfolding this week.

"The excavations have been directed from the top leadership in a misguided and short-term strategy, focused only on winning domestic elections," says Currie. "The country now faces capital controls, an IMF plan (which will come with strings attached) or a continued spiral downwards until the first two options start to seem more palatable.  

"However, Turkey's troubles are country-specific and therefore unlikely to cause real problems to other EM countries.  The valuations of emering markets (EM) are reflecting this overly negative scenario, while the US bonds, equities and currency all seem to be ignoring the possibility of slower growth. This mismatch looks untenable. This situation could be an entry point for EM except for Turkey." 

Or, as the esteemed founder of Franklin Templeton is renowned for observing: the best time to buy is when there is blood on the streets.





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Turkey is now in a hole it has been feverishly digging for the last few years. This is the view of Kim Catechis, Head of Global Emerging Markets at the Legg Mason affiliate Martin Currie in a short note on the turmoil unfolding this week.

"The excavations have been directed from the top leadership in a misguided and short-term strategy, focused only on winning domestic elections," says Currie. "The country now faces capital controls, an IMF plan (which will come with strings attached) or a continued spiral downwards until the first two options start to seem more palatable.  

"However, Turkey's troubles are country-specific and therefore unlikely to cause real problems to other EM countries.  The valuations of emering markets (EM) are reflecting this overly negative scenario, while the US bonds, equities and currency all seem to be ignoring the possibility of slower growth. This mismatch looks untenable. This situation could be an entry point for EM except for Turkey." 

Or, as the esteemed founder of Franklin Templeton is renowned for observing: the best time to buy is when there is blood on the streets.



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