LONDON (Reuters) – Turkey’s financial markets are being battered. The lira is at an all-time low after slumping more than Twenty percent this year, Istanbul’s stock market has recently had its worst day in over 2 years and investors are dumping the country’s bonds.

Below absolutely are a combination of graphics that illustrate the scale from the turmoil and show how Turkish assets now can rival people in other heavyweight emerging markets.


Fathom Consulting’s composite indicator of sovereign financial fragility shows the way in which bad circumstances are getting for Turkey. It is aggregated within the default risk, inflation risk, as well as spread amongst the 10-year government bond yield as well as the central bank policy rate in each country.

Scores take a scale between 0 and 10, where scores below 1 indicate that your government debt at issue is fundamentally safe and scores above 3 indicate it’s fundamentally unsafe.

(GRAPHIC: Turkey heads EM fragility index –


The slump in the lira, right after a long-term decline since 2010, will be the method of obtaining the majority of the existing turmoil.

It does damage by 50 % main ways. Firstly, it drives up inflation, that causes problems considering that the central bank knows President Tayyip Erdogan doesn’t love it when it raises interest rates — the normal policy step to bring inflation backtrack.

Secondly, this makes any dollar-denominated debt in the government or Turkish firms or consumers more pricey to get rid of. Bank for International Settlements data shows Turkey has several dollar debt — $200 billion in reality, almost no below Mexico’s $265 billion.

The flip side though is that the lira now looks well undervalued. A purchasing parity valuation model used at State Street Global Advisors’ calculates it is currently 32 percent undervalued. South Africa’s rand is definitely the next most undervalued currency at 25 % while for Mexico’s peso it is 18 percent.

(GRAPHIC: Turkey’s lira undervalued by way of third after slump –


The put up for sale in Turkey’s bond market has become dramatic. And although the central bank has hiked interest levels 5 percentage points over recent months, the fact is which the country’s Fifteen percent plus inflation means that bond yields in the high teens are typically in real terms below 1 % — achievement a beautiful proposition for investors.

Comparing Turkey’s two-year bond yields (TR2YT=RR) — which hit an all-time high of almost Twenty percent on Thursday — with that from other big emerging markets also paints the graphic.

It is much more than double the amount of 8.6 percent yield on Brazil’s equivalent bonds (BR2YT=RR) and quadruple those found on Bangladesh’s (BD2YT=RR) which both carry the exact same BB-/Ba2 Moody’s and Fitch sovereign ratings.

(GRAPHIC: ‘Real’ yields in emerging markets –


Turkey’s high growth rates have been fueled by a credit boom, which is often a risky business. Credit growth are at 20 % year on year which puts it at number three of all the emerging economies monitored by Bank of the usa Merrill Lynch (NYSE:BAC), behind exactly the Argentina along with the Democratic Republic of Congo.

IIF data shows also implies that the entire loan-to-deposit ratio in Turkey’s banking system is over One hundred pc, meaning any significant freeze in lending markets would cause major problems. South Africa, Chile, Mexico and Colombia even have the exact same risk.

On the plus side, Turkey’s banking system features a small proportion of non-performing loans the vivaz 3 % within the overall amount. That compares to 46 percent in Greece and 56 percent in Ukraine.

(GRAPHIC: Turkey credit growth –


One with the main ways financial analysts appraise the price of stocks could be the price-to-earnings ratios. The bottom the phone number, the cheaper the stock, effectively, and running the numbers on Istanbul’s BIST 100 index (XU100) ensures that its overall P/E ratio has become well below that from other big EM stock markets.

(GRAPHIC: Turkey stocks look cheap –