Calm comes to emerging assets as analysts reassess Turkey woes

The initial panic over Turkey’s market meltdown has eased. The lira, the world’s worst performer this year, and South Africa’s rand led the advance as some investors say Turkey’s problems are unique and others look for buying opportunities across emerging markets.
The MSCI EM index of currencies rose 0.2 percent as of 7:20 a.m. in London, while the measure tracking developing-nation equities fell 0.2 percent. The lira climbed 2.8 percent against the dollar, the rand added 1.9 percent and Mexico’s peso increased 0.6 percent. Indian’s rupee, which hit the 70-per dollar mark for the first time, recovered losses to rise 0.1 percent.
Some analysts say there are few fundamental reasons for assets across emerging markets to fall because of the lira. With average inflation rates at record lows and current-account balances improving, the developing world is diverging from Turkey. Still, the sell-off has helped make valuations attractive. An index of emerging-market stocks is near the cheapest since early 2016, before a two-year rally started.
“After a large sell-off triggered by the rout in Turkey, some investors may have bought emerging currencies on dips,” said Toru Nishihama, Tokyo-based emerging-market economist at Dai-ichi Life Research Institute Inc. “The global economy is still expanding and that’s providing underlying support for the emerging markets. But Turkey’s problems from its spat with the U.S., issues of central bank independence and inflationary pressures are not resolved, which means downward pressure on Turkish assets will continue for a while.” — Bloomberg