A currency crisis, credit-rating downgrades and US sanctions wreaked havoc on Turkish markets this year. Yet that turmoil has set the stage for one of next year’s most attractive trades in the developing world, according to AllianceBernstein and NWI Management.
Shamaila Khan, AllianceBernstein’s director of emerging-market debt, and Hari Hariharan, chief executive officer at NWI Management, both picked Turkish bonds as their top trade idea for 2019 during a panel discussion on Thursday at the Emerging Markets Traders Association’s annual meeting in New York. Khan said she favoured lira-denominated notes, while Hariharan preferred Turkish dollar bonds, especially in the banking industry.
There are some signs the tide has begun to turn. Since slumping to an all-time low in August, the lira has rallied 30%, more than any other major currency tracked by Bloomberg. Still, higher interest rates have crippled some Turkish companies and Moody’s Investors Service expects the economy to shrink through 2019’s first half.
“The last time, two months ago, I had the same trade and people almost killed me on the panel,” Khan said.
Two other investors on Thursday’s panel had different ideas. Jim Barrineau, the New York-based head of emerging-market debt at Schroders, said he recommends a basket of short-duration non-investment grade bonds from developing nations. “Hold it and go to sleep, and you’ll outperform virtually every other asset class,” he said.
The fourth panellist, BlackRock Inc portfolio manager Pablo Goldberg, said he expects emerging-market debt to look more attractive next year compared with US high-yield notes as US growth slows.
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