Can anyone explain how to look (what to look) in order to start understanding macro of an EM (Turkey) Ex - fx & credit risk,I have BBG, although I find the macro section of BMC a bit US/UK/APAC oriented. Any resources (books preferably) would be appreciated.
Kind regards
| Best Public Markets Gig? ER, MM HF, SM HF, or LO AM? | 13 | 2d | ||
| +44 | How to start a family office (HF rainmaker) | 17 | 1d | |
| +34 | Law to Quant Pivot? | 10 | 2d | |
| +23 | Starting Personal Account | 12 | 12h | |
| +22 | Looking for a Fund Manager to partner with to start a new fund. | 17 | 2h | |
| +21 | People who work at hedge funds, what made you interested initially? | 13 | 1d | |
| +21 | How to destress at Pod HF? | 8 | 23h | |
| +19 | Hedge Fund WLB | 6 | 1d | |
| +19 | HF Final Round Interview | 4 | 5d | |
| +17 | Most appealing public credit seats out of RX? | 1 | 5d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
You will need a consultant or something similar. I come from an EM market (LATAM), and foreigners never truly understand how the markets work: they think too much like US markets instead of realizing how different EM is. There are liquidity constraints, gauging political risk (which is a cultural byproduct), culture, regulatory risk. You also have to factor certain shadiness: big firms are more ingrained in the system due to strong ties via corruption.
To have an idea: ex-president of Brazil, Michel Temer, received bribes from Joesley Batista (JBS, the largest meat-packing company in the world, and one of the main agribusiness companies in Brazil; agribusiness is the main component for the economy, so it is a massive deal). Brazil has a tremendous cultural appreciation for meat as a symbol of status. Why the bribes? Brazil has a tremendously difficult congress because of its distribution: there are 30 political parties, and they switch strategic allegiances (parties, candidates) constantly - you’re always dealing with someone who wants something in return, be it power consolidation or financial gain. Brazil’s government is commonly known and accepted to being corrupt and shady, and its judicial system is an untrustworthy mess with special forums, so any regulatory issue can be long-lasting and a pain in the ass. Easier to bribe as a cost of business.
So you have to think less from the perspective of a US markets investor, and more from an actual EM investor: focusing on understanding the environment via culture, political and regulatory risk
Yeah for FX and credit risk grab an IMF article IV report on Turkey- will have some currency valuation models and debt sustainability analysis/balance of payments forecasts (latter 2 underpin sovereign credit view).
The above poster is correct when it comes to investing in EM corporates, but I believe you are asking about macro products.
Consultants are a helpful input in how government policy might shift given how monetary/fiscal/exchange rate policy plays a critical role in analytical factors above (less about “bribes being paid” bc bribes just not big enough generally to move macro balances. Also local consultants usually are lacking in considering cross-country relative value, i.e. lots of narratives but limited ability to translate this to trades (some legendary EM macro investors actually fade the importance of in country visits).
Of course there are exceptions and in the above referenced case Lava Jato did move Brazil macro/FX/sovereign credit, but this is relatively unusual for a corporate bribery scandal.
Hey there! Understanding the macro of an Emerging Market (EM) like Turkey can indeed be a bit of a challenge, but it's definitely doable. Here's a bit of a roadmap for you:
FX & Credit Risk: These are crucial elements to consider. For FX, you need to be aware of the currency bets you're making. For example, in countries like Russia and Turkey, the currency can literally get cut in half in a few months. You can be right on your bottom-up analysis but still get wiped out in these scenarios. As for credit risk, it can be both idiosyncratic (i.e. individual company solvency issues) or systemic (wave of corporate defaults due to the inability to roll financing).
Cost of Capital: Using the correct cost of capital is very important given differing local inflation and interest rates. If you use the appropriate cost of capital, you are accounting for a lot of this risk.
Macro and Political Environments: You simply cannot ignore the macro and political environments in EMs. You have to be at least aware of the risks and manage your overall exposures.
Data and Disclosure: In EMs, you usually get a lot less data. You have to learn to work with less data, but also ask the right questions to management and competitors to make up for this lack of disclosure.
As for resources, I don't have any specific books to recommend, but I'd suggest looking into resources that focus on EMs and macroeconomic analysis. You might also want to check out some of the WSO Courses or the WSO Academy for more in-depth information.
Hope this helps! Let me know if you have any other questions.
Sources: Q&A: Emerging markets investment analyst, 1st Year Macro HF Analyst: My Macro Framework
Non alias veniam dolorum voluptas et sunt. Accusantium vero at necessitatibus alias. Excepturi quia voluptatem non itaque quo. Maiores sed inventore ea animi.
Quo quas voluptatum consequuntur at. Voluptatum voluptatibus mollitia nihil qui eum ut. Tempora nisi minus dolore a ullam voluptatem vitae.
Ex inventore rerum ad optio. Quia accusamus ea illo et saepe aut. Suscipit qui dolorem fuga ut unde et est.
Nihil deleniti commodi repellendus perferendis. Soluta non et ut recusandae amet est optio et. Est sequi nesciunt perferendis praesentium corrupti aspernatur et. Recusandae quia perferendis nesciunt pariatur necessitatibus ut temporibus doloremque. Inventore aut dolor impedit nihil ea. Fuga quia dolore hic unde. Aut incidunt ut optio ab aliquid ab dicta.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...