Amid a slew of bad news roiling Turkish markets, there’s one thing in favor of the country’s local-currency bonds: they’re not particularly popular with foreign investors.
Non-residents’ holdings of the country’s bonds averaged 21.6 percent in the first quarter, according to central-bank data. That’s slightly below the emerging-market average of 22 percent, and nowhere near more popular kids like South Africa, at around 40 percent.
Countries with the highest foreign ownership are the most vulnerable to a selloff as U.S. interest rates rise, prompting investors to move money out of riskier markets to the developed world, according to Goldman Sachs Group Inc. Apart from South Africa, those include Indonesia, Russia and Colombia, which have high foreign-holding ratios both relative to their peers across developing nations and their own past.
Turkey’s lira slumped to a record low against the dollar on Thursday after data showed inflation accelerated more than forecast, leading to concerns that monetary policy remains too loose to deal with an overheating economy. The country’s current-account deficit, one of the largest as a percentage of output among peers, is ballooning.
No wonder yields on Turkish 10-year bonds soared 49 basis points to 13.03 percent on Thursday, the highest among major emerging markets.
According to Goldman Sachs, domestic investors are more stable and have greater long-run confidence in their own markets. With almost 80 percent of Turkish lira-denominated bonds in local hands, that may keep a lid on bond yields in coming months.
Read more about Goldman Sachs’ research on foreign ownership here
--With assistance from Constantine Courcoulas .
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net.
To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Srinivasan Sivabalan
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