Risk ap­petite en­dures

Dünya Executive - - FINANCIAL CORNER -

The prob­lem with gen­er­al­iza­tions – styl­ized facts - is that they are what any se­ri­ous anal­y­sis re­quires as es­sen­tial in­gre­di­ents, but also that if one stops at that right there, they won’t help. Hence, the stock ex­change. On the ba­sis of cheap­ness mostly, but also on the grounds that a rel­a­tive and mild re­cov­ery is on its way per­haps, the stock ex­change per­formed ad­mirably well.

Banks yielded c. 10 per­cent on a dol­lar ba­sis in Septem­ber, the top per­former stock of the month so far glob­ally.

Peo­ple for­get some­times what fig­ures mean. For in­stance, a 10 per­cent credit growth rate for pri­vate sav­ings banks 12 months ahead is a very high rate by global stan­dards. As it comes from neg­a­tive ter­ri­tory, the im­pact on out­look would be even more pro­nounced, as is now the case.

Sim­i­lar con­sid­er­a­tions ap­ply to fixed in­come. Be­cause bonds have al­ready been sold –in my view a lot, but this ob­vi­ously squares with coun­try rat­ings - any down­side has lit­tle place to go, but an up­side has more room.

Like­wise, be­cause the swap curve had al­ready priced in a 325 ba­sis points cut, and be­cause Goldman Sachs is­sued a report that trig­gered in­ter­est in bank stocks, which re­flects both still solid a risk ap­petite as well as a fa­vor­able out­look for Turk­ish banks, the CBRT de­ci­sion has passed with­out a change.

Or­di­nar­ily, even two months ago, most analysts would have pre­dicted a sell-out con­ducive to a cur­rency over­shoot­ing; noth­ing happened de­spite a 750 ba­sis points cu­mu­la­tive rate cut.

How­ever, there is also the fol­low­ing point. The CBRT didn’t sig­nal a real rate re­duc­ing se­quen­tial cut sea­son. As long as the an­tic­i­pated real rate hov­ers around 3 per­cent, risk-lov­ing in­vestors – they are the only one left - may con­tinue to feel com­fort­able over short time win­dows.

That the U.S. and China will rene­go­ti­ate in Oc­to­ber pro­vided the global wall pa­per new flow, per­ceived by EM in­vestors as a go. Given the global green light, this cli­mate is likely to last for an­other two weeks.

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