Bloomberg Businessweek

13

 REMARKS Bloomberg Businessweek August 20, 2018

BNP Paribas are the most exposed lenders, according to
Bloomberg Intelligence. But those banks, and certainly their
host nations, should be able to ride out loan losses. Shares
of BBVA, the worstof, are down 12 percent this month and
24 percent so far this year.
More vulnerable are Turkey’s fellow debtor nations.
Contagion can occur mechanically when investors lighten

up positions in, say, Argentina or South Africa to compensate

for losses on Turkey, keeping their overall emerging-market

risk below some predetermined threshold. Or it can occur if

Turkey becomes a “wake-up call” that leads investors to take

a closer look at other nations’ fundamentals and ind them

wanting, says Akoner of BNY Mellon.

And things could get worse from here. “Our big worry is if

Turkey really goes into a major, major crisis, and they impose

capital controls,” preventing investors from getting their

money out, Paul McNamara, a London-based fund manager

at GAM UK Ltd., told Bloomberg Television. “That’s the sort

of thing that brings the asset class into sort of disrepute.”

If prices go down too far, though, bottom-ishers will surely

emerge, as they always do. The volatility set of by Turkey is

“replete with opportunity,” Jan Dehn, head of research at

Ashmore Group PLC in London, wrote to clients on Aug. 13.

Turkey’s problem is “entirely self-inlicted, and it will not sud-

denly appear in, say, Poland or Uruguay,” he added.

Dehn’s approach echoes the Wall Street adage that the best

time to invest is when there’s blood in the streets. Exciting

advice unless you’re an ordinary Turkish citizen and the blood

in the streets is your life savings. —With Enda Curran and

Michelle Jamrisko

Which Emerging Markets Are Most Vulnerable?

This Bloomberg Economics scorecard equally weights four key criteria. Turkey’s vulnerability stood out even
before the lira’s recent plunge. The ranking isn’t the whole story, though. For example, Bloomberg economists
say recent trends in Colombia are more reassuring than this snapshot suggests.

25%

0

○ Colombian peso ○ Argentine peso ○ Turkish lira

DATA: RANKINGS BY BLOOMBERG ECONOMICS. CURRENT ACCOUNT: IMF ESTIMATES OFAND PRIVATE DEBT OWED TO NONRESIDENTS AS SHARE OF GDP AT END OF 2017. GOVERNMENT EFFECTIVENESS: 2016 WORLD BANK CALCULATIONS. INFLATION: CHANGE IN CONSUMER PRICE 2018 TRADE IN GOODS AND SERVICES PLUS INVESTMENT INCOME AS SHARE OF GDP. EXTERNAL DEBT: WORLD BANK ESTIMATES OF GOVERNMENT S FROM 2Q 2017 TO 2Q 2018

Vulnerability ranking Current-account balance External debt

Government

efectiveness Inflation

Turkey

Argentina

Colombia

South Africa

Mexico

Indonesia

Brazil

India

Philippines

Russia

Poland

Chile

Peru

Malaysia

Saudi Arabia

China

Thailand

South Korea

Taiwan

0.

0.

0.

0.

0.

0.

-0.

0.

-0.

-0.

0.

1.

-0.

0.

0.

0.

0.

1.

1.

1 2 3 4 5 6 7 8 8

10

11

12

13

14

15

16

16

18

18

-5.

-2.

-2.

-1.

-1.

-1.

-2.

-0.

4.

-0.

-1.

-0.

2.

5.

1.

9.

5.

13.

-5.4%

36.

40.

49.

38.

34.

32.

19.

23.

33.

72.

65.

31.

68.

21.

13.

32.

27.

31.

53.5%

27.

3.

4.

4.

3.

3.

4.

4.

2. 4
   
   
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3. 
   


4. 
   


5. 
   
   
   
   1. 
      
   
   
   2. 
      
   
   
   3. 
      
      
      
      1. 
         
      
      
      
      
   
   
   
   

12.8%