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August 17, 2018 www.intellinews.com I Page 33
bne:Credit Goldman Sachs says
imposition of capital controls to address Turkey crisis could quickly expose other EM markets
Turkish jitters weight on Hungary's bond auction
Turkey imposing capital controls could quickly exacerbate the exposure of other emerging market economies to its financial crisis, Goldman Sachs said on August 16.
Turkish Finance and Treasury Minister Berat Albayrak ruled
out turning to capital controls or approaching the IMF to cure Turkey’s economic ills during a conference call with thousands of investors on the day, but analysts were not convinced by his plan for addressing the country’s currency crisis, which, if not corrected, could spark a balance of payments crisis.
"Full-blown capital controls that everybody is worried about I think have a pretty limited chance of success, partly because they have a big external funding requirement... So I don't think capital controls here are the solution," Kamakshya Trivedi, co-head of emerging markets and foreign exchange research at Goldman Sachs, told CNBC's "Squawk Box Europe" on August 16.
Hungary's state debt manager AKK sold a combined HUF61.5bn (€187mn) of bonds at auctions on August 16, HUF6.5bn more than planned but at higher costs as yields moved up from the last auc- tion two weeks ago.
Jitters over Turkey's falling currency have weighted on bond prices and local currencies across Central Europe. The forint weakened to 325 versus the euro on Wednesday but pared losses as the lira bounced back. Bond prices were also on a rollercoaster this week.
The AKK sold HUF25bn of three-year bonds at the auction, rais- ing its original offer by HUF5bn after primary dealers bid for HUF34.2bn. The average yield came to 1.74%, 1bp over the second- ary market benchmark and 18bps over the yield at the previous auction.
The debt manager sold HUF14bn of five-year bonds, HUF6bn under the plan as bids totalled HUF16bn. The average yield rose by 18bps from the last auction to 2.95%, which is 3bps over the benchmark.