Volatility in the world’s emerging economies has spiked, in our view related to Turkey’s building economic and currency crisis. We continue to avoid direct exposure to Turkish equities and emerging market debt overall but are concerned that the crisis could spread to other countries in the region. One concern of ours is the European banking sector which is already struggling with Italian debt exposure. So far this week some stability has returned to the Turkish Lira as the government announced relaxed standards for troubled loan restructuring. But, ultimately interest rates will likely have to be raised to support the currency.
