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How Contagious Is Turkey?

By Advisor Perspectives
Capital Markets

The Turkish lira has dropped 35% as of August 16, putting pressure on inflation as well as the country’s debt-heavy corporations and banks. Investor jitters have spread over the past week to some other emerging markets and European banks with Turkish exposure, but we don’t expect contagion to expand much further from here.

To be more specific, despite the recent turmoil and Turkey’s fundamental challenges, we don’t believe that markets are in for an emerging-market collapse on the order of the 1997 Asian financial crisis, a European financial crisis or global contagion.

That’s not to say that Turkey’s situation won’t get worse before it gets better, or that some global investors won’t sell out of emerging markets. But at the end of the day, Turkey’s problems are highly country specific, and there are still worthwhile opportunities across emerging markets. In fact, the sell-off may create more attractive entry points in certain assets.

Read more at Advisor Perspectives.

Photo: The Russian Presidential Press and Information Office

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