Bloomberg|Aug 14, 2018, 08.52 PM ISTWhile some investors say bargains are emerging, others are selling stocks and bonds.By Paul Wallace, Netty Ismail and Yumi TesoAs emerging markets take a battering from Turkeys turmoil, with stocks and currencies near their lowest in more than a year, investors are positioning themselves to ride out the pain.Traders pushed down emerging-market securities Monday as Turkish assets sank, before stabilizing on Tuesday.
The carnage added to an already fragile landscape amid tensions between the United States and other major economies such as Russia and China.
While some investors say bargains are emerging, others are selling stocks and bonds and holding cash.Heres what analysts and investors are saying:Kevin Daly, a money manager at Aberdeen Standard Investments in London:The almost-$800 billion investment group sold some emerging-market holdings on Monday to increase its cash positions.Daly sees few signs the Turkish rout will end soon and says emerging markets as a whole could be in for further pain.Playing a market like this is difficult, he said.
There arent any obvious safe zones.Nader Naeimi, the Sydney-based head of dynamic markets at AMP Capital Investors Ltd:AMP increased its exposure to the yen, dollar and Swiss franc because theyre havens during tumultuous timesHes short the Russian ruble, Indonesian rupiah and Philippines peso and says the risk of a market meltdown is high.EM currencies might be attractive again if they fall another 10 percent, he said.
For now, the only equities hes interested in are Chinas, given the nations current-account surplus and ability to loosen fiscal and monetary conditions if it wants to.Jan Dehn, head of research at Ashmore in London:The selloff has left emerging markets replete with opportunity.While Turkish assets probably havent bottomed yet, it is time to buy stocks, bonds and currencies elsewhere, he said.Turkeys problems are entirely self-inflicted and will not suddenly appear in, say, Poland or Uruguay.Hans Redeker, global head of foreign-exchange strategy at Morgan Stanley in London:Investors should short South Africas currency against Japans yen, targeting an 8 percent strengthening of the latter to 7.1 per rand from 7.67.With ongoing weakness in Turkey, investors will have to add hedges in EM, he said.
South African government bonds remain the top overweight duration in the foreign portfolio.
This means foreigners have to buy USDZAR to hedge their bond position and reduce overall EMFX beta risks.Mark Mobius, co-founder of Mobius Capital Partners LLP:The turmoil is creating opportunities, including in Brazilian consumer stocks, the veteran emerging-markets investor said in a Bloomberg TV interview.But traders need to be careful because theres a real possibility Turkey will impose capital controls, which would be very, very bad news for developing-nation assetsChinas yuan will probably decline even more if Beijings trade war with Washington worsensNicholas Ferres, chief investment officer at Vantage Point Asset Management in Singapore:The hedge fund has added exposure where theres been an emotional overreaction, he said.Ferres is betting on a rebound in the currencies and stocks of India and Indonesia and says the dollars strength is well advanced.Toru Nishihama, emerging-market economist at Dai-ichi Life Research Institute Inc.
in Tokyo:The lira may stay under pressure as issues in Turkey and its tensions with the United States have not improvedAnkaras measures only tweak things in the short term, while nothing fundamental, such as central bank independence, has been resolvedCould South Africa be hit next because of its weak fundamentals, or Russia as its relations with the United States deteriorate, or Mexico where the peso has strengthened on expectations surrounding the new president but no concrete outcome has been deliveredAsia is probably the most resilient region, but close attention needs to be paid to the yuan.
A decline beyond 7 per dollar would be a blow to other Asian currenciesMaximillian Lin, emerging-market Asia strategist at NatWest Markets in Singapore:NatWest Markets is buying the greenback against Singapores dollar and South Koreas won and says those trades will improve if theres further Turkish weakness, though Indias rupee and Indonesias rupiah will be hit harderTakeshi Yokouchi, senior fund manager at Daiwa SB Investments Ltd.
in Tokyo:I dont see a bottom just yet for the lira and Ive reduced my exposure to emerging-market assets in general for nowHe raised yen-cash positions; although there may be some risks for financial institutions in Europe due to their exposure to Turkey, this is unlikely to become a significant global riskFrom a medium- to long-term perspective, the lira may rebound as Turkey offers higher yields, and when that happens, the turnaround could be quite fastThere is no contagion effect of Turkish Lira fall on India rupee: Khoon Goh, ANZTurkish lira crashes to record low on worries over economy, US rowDollar firmer ahead of Fed minutes; Turkish lira tumblesTurkish lira pulls back from a record low, but leaves global markets rattledCommenting feature is disabled in your country/region.From Around The WebMore from The TheIndianSubcontinent