According to urban myths, it is said that when you are in London you are never more than 6ft away from a rat, and it appears that within emerging markets you are never more than two steps away from a crisis, as this week has proven with two events having hit the headlines. Firstly, in Turkey, President Erdogan, out of the blue, replaced the central bank Governor.  Markets did not react kindly, with the Lira plummeting and yields on Turkish debt widening. Thankfully, this is an idiosyncratic event and there appears little risk of contagion.  On a positive note, if the currency remains at its current levels, it will mean beach holidays to Turkey will be 10% cheaper, when such activities are permissible. In the context of the portfolios, this was a nonevent, but clearly more of an immediate consideration for those institutions with exposure to the region. The emerging markets both from a debt and equity perspective throw off challenges, but at the same time create many mispriced opportunities.

The second event is more comical in nature, but is far more impactful, which is a shipping container that since Tuesday has been blocking the Suez Canal, the world’s busiest shipping lane, causing huge delays and expensive detours.  Lots of memes are spreading like wildfire across the Internet, the pick of the bunch is the caption – we all make mistakes, but at least they’re usually not “we can see your mistake from space” bad.  With a satellite image showing the incident in all its glory, oh dear!

On the pandemic front we are definitely seeing two speeds taking place.  In the US the vaccine rollout progresses at a great pace.  However, the same cannot be said in Europe, where the infection rate has been picking up in France, Germany, and Spain.  In the UK we are stepping ever closer to the easing of lockdown, but in Europe this looks to be pushed further out.  One improvement this week has been the easing of tensions between the UK and Europe, de-escalating the dispute over vaccine export curbs.  “Reciprocally beneficial relationship” to tackle COVID-19 was issued by both parties. Hopefully, the European authorities can focus on the job in hand of getting vaccines rolled out and progressing on the return to normal.

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete.  Unless otherwise specified all information is produced as of 29^th March 2021.

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