INSUBCONTINENT EXCLUSIVE:
By Abhishek Vishnoi
There’s a “real possibility” Turkey will impose capital controls to stem the plunge in the lira, which would be
bad for the whole developing-nation asset class, said veteran emerging-markets investor Mark Mobius.
“If Turkey is forced to close the
foreign-exchange window so that foreign investors cannot get out, that will be a very, very bad example for other emerging markets," Mobius
said in a Bloomberg TV interview with Rishaad Salamat and Haidi Lun
“As you know in the past during the Asian crisis, Malaysia did that and it was was very, very bad news.”
While some investors are
starting to weigh the possibility, the Turkish government has said repeatedly it won’t limit the flow of foreign money in and out of the
President Recep Tayyip Erdogan said over the weekend that the country wouldn’t raise interest rates or accept an international
bailout.
Mobius, who left Franklin Templeton Investments earlier this year to set up Mobius Capital Partners LLP, said he was “deeply
concerned” by the standoff between the U.S
and Turkey over Ankara’s detention of American pastor Andrew Brunson
The tension between the two nations, coupled with concern over Turkey’s current-account deficit and runaway inflation, has dragged the
lira down by around 26 percent this month.
White House National Security Adviser John Bolton said Monday that there was nothing further to
negotiate until Brunson is freed, according to two people familiar with the matter.
The veteran investor’s latest view on Turkey contrasts
with what he said just over a month ago
President Erdogan has been able to stay in power because of his ability to keep the economy going, Mobius said in a July 11 interview after
Erdogan tightened his grip on the central bank and appointed his son-in-law as economic czar.
Malaysia introduced capital controls in 1998
during the Asian financial crisis
Although criticized at the time by the International Monetary Fund, they were ultimately seen as helping to stabilize the economy.
While the
current turmoil in emerging markets is creating opportunities -- in Brazilian consumer stocks, for example -- investors need to be careful,
Further declines in China’s yuan are also likely if the trade war with the U.S
