Turkey fall out: emerging markets funds, South African companies, DP Eurasia and Chemring

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“Cyclical stocks were out of fashion on Monday as miners and travel companies served to drag down the FTSE 100, falling 0.7% to 7,617 amid wider weakness in global markets triggered by troubles in Turkey.

“On the UK market, TUI, EasyJet, Anglo American and Evraz were among the FTSE 100 stocks in negative territory.

“In Europe, the Cac 40 index in Paris fell 0.5% in early trading on Monday and Asian markets were also weak including a near-2% decline in Japan’s Nikkei 225 index,” says Russ Mould, Investment Director at AJ Bell.

Turkey fall out: emerging markets funds, South African companies, DP Eurasia

“Fund management group Ashmore is widely seen as the London-listed bellwether for emerging markets and its shares are unsurprisingly being sold off in the wake of the crisis in Turkey.

“The recent collapse in the Turkish lira has served to trouble investors around the world and triggered a ‘risk-off’ mentality. Put simply, investors are less willing to hold assets in higher risk areas such as emerging markets, and are switching instead to assets deemed to be safer havens.

“The read-across to Ashmore is fairly straightforward. By selling down its shares, investors are betting that Ashmore could report a big outflow of assets under management when it next updates on trading.

“It is a similar story with emerging market funds, many of whom are experiencing price weakness on Monday such as BlackRock Emerging Europe and BlackRock Frontiers Investment Trust.

“Concerns about economic and geopolitical issues in Turkey have served to drag down currencies in other parts of the world and in turn hit the price of various company shares, thus hitting investors who hold these stocks directly or indirectly via funds.

“On the London Stock Exchange, companies with exposure to South Africa have been hit by weakness in the rand including private hospital group Mediclinic and banking group Investec.

“And directly hit by weakness in the Turkish currency is Domino’s Pizza franchise owner DP Eurasia, down 12% on Monday, as its reporting currency is the Lira and its share price is quoted in pound sterling.”

Chemring

“A profit warning from Chemring in the wake of a tragic incident which left one worker dead and another badly injured on Friday is having a significant impact on the company’s share price.

“The £10m to £20m hit to its profit for the 12 months to 31 October is concern enough but is compounded by a statement that the company cannot yet fully quantify the impact on either this financial year or next.

“Investors will have to wait until 4 September for an update. Chief executive Michael Ord has only been in post for a matter of weeks after the retirement of his predecessor Michael Flowers.

“Flowers had led a restructuring of the group which had arguably over-stretched itself at the height of the conflicts in Iraq and Afghanistan.”

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