EMERGING MARKETS-Turkish assets recoup some losses amid emerging markets gloom

  • Reuters
  • Stock Market News
EMERGING MARKETS-Turkish assets recoup some losses amid emerging markets gloom
Credit: © Reuters.

By Sujata Rao
LONDON, May 9 (Reuters) - Turkish stocks on Monday bounced 1
percent off eight-week lows plumbed last week and the lira
steadied, but broader emerging assets remained under pressure
from an increasingly gloomy global economic outlook.
A host of negatives is preying on Turkish markets, not least
the departure last week of Prime Minister Ahmet Davutoglu, who
is perceived as a moderate, after a tiff with President Tayyip
Erdogan. That drove Turkish equities and the currency down 8
percent and 4.5 percent respectively last week .XU100 TRY= .
Among other factors weighing on sentiment in Turkey is the
country's bombing of Kurdish militant targets in Iraq, the
jailing of two prominent opposition journalists and the stalling
of progress on a deal with the European Union that would have
been advantageous for Ankara.
Tourism receipts are also falling steeply.
However, Istanbul stocks rallied after last week's losses
while the lira firmed 0.15 percent and credit default swaps
eased from eight-week highs.
In some good news for Turkey, data showed March industrial
production rose 2.9 percent year-on-year.
"It's always a very volatile market and you tend to get the
big adjustments very quickly when there's a shock like a
political event," William Jackson at Capital Economics said.
He predicted the lira would weaken further, given Turkey's
current account gap of 4 percent of gross domestic product and
high levels of external corporate debt.
Analysts at JPMorgan (NYSE: JPM ) agreed, adding that recent political
developments required a higher risk premium on the lira. They
estimated that Turkish equities and bonds had attracted $1.8
billion and $2.3 billion respectively over the past three months
and said these holdings were at risk of being unwound.
"We expect the political uncertainty to weigh on bond and
equity inflows into Turkey ... Additionally, existing holdings
of fixed income and equities are likely now to be at least
partially FX hedged," they told clients.
"We also see rising risks to the current account position as
the summer months will reveal the hit to tourism revenues."
Broader emerging assets traded with a weak bias, with MSCI's
emerging equity index hovering just off six-week lows .MSCIEF
while the abandonment of a June rate hike in the United States
pushed the dollar index to one-week highs .DXY , weighing on
emerging currencies.
Last week's lacklustre U.S. jobs report and
worse-than-expected Chinese trade data have only served to
deepen worries about the outlook for the world's biggest
economies. The developing world too mostly continues to post
sluggish growth and poor corporate earnings.
Mainland Chinese stocks fell to eight-week lows, with the
Shenzen index falling 2.1 percent and adding to Friday's 3
percent slump and Shanghai falling 2.8 percent .SSEC after the
poor trade data.
Jackson said the emerging markets recovery since February
had been driven by reduced fears of a hard landing in China and
by higher commodity prices.
"The Chinese export data was a bit weaker so it doesn't
suggest the economy has taken off immediately ... So perhaps the
tailwinds that brought EM equities and currencies up over the
past month or two are not providing a further push-up," he said.
However there were some bright spots. Indian shares jumped
more than 1 percent for their best gain in more than two weeks,
boosted by a string of positive corporate results. Gains were
led by bank HDFC HDFC.NS which rose 2.6 percent after posting
a 40 percent surge in profit last week.
Another lender, Yes Bank YESB.NS , rose 3.2 percent.
Hungarian stocks rose 1.2 percent due to a 2 percent surge
in bank OTP OTPB.BU , a 1.8 percent rise in drugmaker Richter
GDRB.BU and 1.2 percent gains in oil group MOL MOLB.BU ,
which posted better-than-expected first quarter results.

For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB )
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 806.01 +0.67 +0.08 +1.49

Czech Rep .PX 877.68 +9.89 +1.14 -8.22

Poland .WIG20 1855.71 +3.00 +0.16 -0.19

Hungary .BUX 26553.87 +425.03 +1.63 +11.01

Romania .BETI 6471.56 +28.63 +0.44 -7.61

Greece .ATG 611.48 +5.87 +0.97 -3.15

Russia .IRTS 912.02 -4.51 -0.49 +20.47

South Africa /.JTOPI 45544.28 +442.41 +0.98 -0.55

Turkey .XU100 79260.27 +892.22 +1.14 +10.50

China .SSEC 2832.91 -80.34 -2.76 -19.96

India .BSESN 25678.42 +449.92 +1.78 -1.68

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep EURCZK= 27.01 27.02 +0.04 -0.04

Poland EURPLN= 4.41 4.43 +0.45 -3.45

Hungary EURHUF= 314.61 314.10 -0.16 +0.01

Romania EURRON= 4.49 4.49 +0.04 +0.70

Serbia EURRSD= 122.68 122.85 +0.14 -0.99

Russia RUB= 65.53 65.85 +0.49 +11.32

Kazakhstan KZT= 333.85 334.67 +0.25 +1.99

Ukraine UAH= 25.17 25.17 +0.00 -4.84

South Africa ZAR= 14.90 14.87 -0.24 +3.74

Kenya KES= 100.30 100.30 +0.00 +1.89

Israel ILS= 3.78 3.79 +0.23 +2.94

Turkey TRY= 2.92 2.93 +0.12 -0.21

China CNY= 6.51 6.50 -0.13 -0.21

India INR= 66.43 66.59 +0.24 -0.35

Brazil BRL= 3.50 3.50 +0.16 +13.28

Mexico MXN= 17.85 17.87 +0.10 -3.83

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt 11EML EMBIG 421 -2 .02 7 16.38 1

All data taken from Reuters at #N/A *The record could not be
found GMT.
Currency percent change calculated from the daily U.S.

close at 2130 GMT.

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