As the emerging markets are taking massive hits, both in form of their currencies losing substantial value, but also their stock-exchanges, and Latin-American companies listed both in home markets and abroad.
As a second step order it is good to analyze what international companies have big exposure to various emerging markets, and keep them on the radar for trading purposes, both as potential longs and shorts.
Below chart of the Argentinian Peso and the Brazilian Real.
We have chosen to look at 2 European telecom companies below, Telefonica (TEF SM) and Telecom Italia (TI IT). One often believe that Telecom companies are safe, conservative companies as they are basically utilities and people used their products daily.
Telefonica (TEF SM), which is the biggest Spanish telecom operator, and one the biggest telecom operators in the world. Roughly 50% of their revenues come from various Latin-American countries. Its share-price have over the last 3 months dropped over 11%, which can be considered a lot for telecom provider (Note the massive volume puke).
Telecom Italia (TI IT), the operator of its namesake country, received about 25% of its revenues from Brazil. As can be seen above Telecom Italia’s share price is down over 20% in the last 3 months, showing that Investors are worried operations are going get worse in various countries they operate, especially Brazil.
Telefonica (TEF SM) and Telecom Italia (TI IT) are just two example of companies that have exposure to Latin-America. All in, as the world is getting more volatile, it is good to assess 2nd and 3rd order effects on various companies from their exposure in different regions. For example look at companies that are suppliers, or distributors to companies that have big exposure in these affected countries and regions.
This chart needs no further commenting, The two FX pairs and the two telecom operators.
Source: charts by Bloomberg