Nov 16 2017

GAM sells Turkey assets, citing possible crisis

Swiss asset manager GAM Holding said it had sold all its assets in Turkey, warning that high inflation and a surge in foreign borrowing could lead to financial crisis as early as next year.

Switzerland’s largest listed fund house, with about $185 billion under management, said Turkey was an outlier among emerging markets, most of which had reduced their current account deficits and increased their foreign currency reserves, said Paul McNamara, a director of investment at the Zurich-based firm, according to Reuters.

Turkey is by far and away the country we are most worried about. Turkey looks to us like an accident waiting to happen…So, lots of foreign debt - tick; current account - tick; property boom - tick, politics - tick. You go though the list and it's a recipe for trouble.

McNamara, who spoke at the 2018 Reuters Investment Outlook Summit, said rising oil prices and a real estate boom were also destabilising factors.

Turkish Deputy Prime Minister Mehmet Şimşek, charged with leading Turkey’s economic policymaking, said this week that Turkey was at the end of a problematic period. It was very difficult to draw up negative scenarios about the country, he said, adding that interest from currency speculators would wane and the government planned comprehensive reforms in the first quarter of next year.

McNamara, who is lead manager for GAM's emerging market bond, currency long-only and hedge fund strategies, said he was less concerned about South Africa, which he views as another weak link in emerging markets.