Savers who love to go looking for attractive yields around the markets had confirmation this morning that behind the high returns there is a strong risk. So strong that it is often not worth the candle, as recalled by tens of thousands of customers of Italian banks who in his time had the unfortunate idea of putting Argentine tango bonds. This time the bolt from the blue was thrown by the president/sultan of Turkey, Reccep Tayyp Erdogan who did not hesitate to oust the governor of the Central Bank on the spot who, with a severe policy, had achieved significant successes against inflation. But when the banker Naci Agbal decided to raise rates up to 19 percent to defend the currency against the dollar, the currency in which the country's companies are heavily indebted, Erdogan had no doubts about starting the turnaround. Regardless of the consequences: -12% on Monday morning the lira, again above 8 against the dollar, the Istanbul Stock Exchange index -9,4%, even worse -17,5% the ETF on Türkiye traded on the Nasdaq.
A bad joke for the bank treasurers, who had learned to trust the governor Naci Agbal who in a few months had brought just under 5 billion dollars to the Turkish Stock Exchange invested by managers impressed by an excellent performance of the economy, thanks to the policy of the banker Erdogan had appointed in November to avoid collapse. It was even worse for Japanese savers. Yes, this time it seems they were the victims of the sudden turnaround in Turkish finance, judging by the sell-off that hit the Nikkei this morning. No wonder why the Japanese, a bit like the Italians, boast the lowest public finances on the planet (over 220% of GDP against around 160% of ours) together with more robust private savings, equal to around a quarter of the total. It is therefore not surprising that private individuals from the Rising Sun, exasperated by the negative rates paid by banks and insurance companies, have tried to make money work in a country that offers double-digit returns. Unfortunately for them, the horizon for emerging markets is again troubled by upward pressure on US interest rates which is jeopardizing the balance of the countries most indebted to the US currency.
In short, one is looming scenario similar to that of 2013, when faced with the tapering (ie the selective increase) of US rates, the emerging countries went into crisis. This time, in truth, things could go better: a stronger dollar, in fact, could favor exports to the USA, exploiting the liquidity in consumers' pockets. But, in order not to run into nasty surprises, it is better to turn to countries less tied to dollar debt. In short, Mexico is better than Brazil also protagonist of a strong rally in recent months. Or, better yet, focus on funds and ETFs linked to the MSCI Emerging Markets index which includes 26 countries (including Turkey) but which is two-fifths linked to China followed by other solid markets, such as Taiwan and South Korea Year-to-date performance is around +3,5%, thanks to the support of Hong Kong +9%, Seoul +5%, Mumbai +8%. The contribution of the Brazilian stock exchange was negative: -5%.
