Turkey’s wild asset swings continue today. The lira has been weakening and the price swings intraday are astonishing.
JPM Emerging Market Fx index continues falling sharply as we have seen notable moves in several of the major Emerging Markets Fx pairs.
Turkey 5 year CDS continues rising sharply.
Besides Turkey being the obvious loser, some European banks are feeling the pain. On an overall level the Turkish exposure among European banks is only 1%, but there are five banks with rather big exposures via holdings in Turkish banks.
BBVA has the largest exposure via holding in Garanti bank. BBVA continues the free fall move today.
The banks with most exposure are: BBVA (Garanti), UCG (Yapi Kredi), ING (wholly owned subsidiary), BNP (Teb) and HSBC (wholly owned subsidiary).
Below is a chart showing the above banks performance as well as the Euro Stoxx Bank index (SX7E). UCG is the biggest loser, followed by BBVA, ING, SX7E, BNP and HSBC.
It is easy to get very bearish given the news but just as we outlined on August 3rd in our post “European Indices Fading”, Euro Stoxx 50 had reached resistance levels and was due for a correction.
We are now approaching the first support level we wrote about back then:
3400 is the bigger support lower while the negative trend line remains the resistance.
Euro Stoxx 50 remains trading trapped within the large consolidation and we are now down to first support levels. It’s always something unexpected that moves the markets, but getting bearish on Turkey here seems a rather late trade.
Source: charts by Bloomberg