Argentina, Turkey show not all emerging markets worth the risk

Economic troubles in Turkey, Argentina and South Africa are showing investors that not all emerging markets are worth the risk despite potentially lucrative returns, according to CNBC’s Joumanna Bercetche.

In Turkey, the economy is stagnating with annual growth toward the end of 2018 posting a negative 3 percent figure. Meanwhile inflation is just below 20 percent after the lira slumped by almost a third against the dollar last year.

There is likely to be more volatility in Turkey going forward as locals buy dollars and worry about the growth outlook, one trader said, Bercetche reported on Tuesday.

"Markets would like to see a shift in the growth model: away from a credit-dependent model towards a more sustainable one," said Robin Brooks, chief economist at the Institute of International Finance. One cannot assume Turkey is an isolated event as investors become increasingly wary of financing countries that are too heavily indebted/credit dependent, he said.

Meanwhile, Argentina’s peso is close to an all-time low and the South African rand is falling back to levels last seen in December, Bercetche said.

Argentina is also in the depths of a recession after inflation surged and as its leadership grapples with pressure from the International Monetary Fund to implement cost-cutting measures.