Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Military Flashpoint With Greece: In late July, a Turkish seismic exploration ship (“Oruc Reis”) was sent to Kastellorizo, an island on the Greek constellation shelf, to carry out gas surveys through August 23rd, and was accompanied by 15 Turkish naval ships. The French have deployed warships and fighter jets to the area, as the La Fayette frigate is participating in joint exercises with the Greek navy. Tensions between Turkey and France have already been at heightened levels since Turkey targeting the Forbin with radar; and   *Feckless Central Bank Leads To Crisis: A crisis in confidence starts slowly but is difficult to stop once momentum gathers. In Turkey's case, the stop gap measures now appear to be crumbling. With both locals and foreigners fleeing the TRL, the the risks of the introduction of a TRL gray market should NOT be underestimated. MSCI has also threatened to downgrade Turkey's equity market to frontier status which would trigger further outflows.

*Military Flashpoint With Greece: In late July, a Turkish seismic exploration ship (“Oruc Reis”) was sent to Kastellorizo, an island on the Greek constellation shelf, to carry out gas surveys through August 23rd, and was accompanied by 15 Turkish naval ships. The French have deployed warships and fighter jets to the area, as the La Fayette frigate is participating in joint exercises with the Greek navy. Tensions between Turkey and France have already been at heightened levels since Turkey targeting the Forbin with radar; and   *Feckless Central Bank Leads To Crisis: A crisis in confidence starts slowly but is difficult to stop once momentum gathers. In Turkey's case, the stop gap measures now appear to be crumbling. With both locals and foreigners fleeing the TRL, the the risks of the introduction of a TRL gray market should NOT be underestimated. MSCI has also threatened to downgrade Turkey's equity market to frontier status which would trigger further outflows.

*Backward, Not Forward: Turkey is fast becoming a frontier market. The rise of President Erdogan looks to threaten generations of wealth accumulation and economic progress given his efforts to control the economy, capital markets (capital controls/litigation), and politics via a combination of: changing constitutional law; and whittling down central bank reserves and the TWF (USD 33 bn sovereign wealth fund);  increasing debt/GDP; the re-allocation of banking system capital for government spending;  and recent military incursions/ involvement (Syria, Libya, Azerbaijan, Greece, and Cyprus);  * Finding The Exit Door: There is clearly a payments crisis brewing for Turkey, which is likely to be quickly crystallized if TRL confidence is lost. For those Turkish exposed financials, the exit window is getting smaller assuming a steady state. Munich Re (MUV2.GY) was fortunate to exit (unit was small), Unicredit (UCG.IM) is trying to exit now, HSBC Holdings (5.HK) is purportedly still trying to exit, and some banks have simply reduced intragroup lines; and  *Market Black Swan: With Turkey extremely vulnerable to F/X rollover risks, the question remains as to who is going to provide the necessary financing to keep President Erdogan afloat. Turkey has all of the ingredients, in our view, to become Black Swan event markets with several factors including a move by MSCI to downgrade Turkey to a Frontier Market as a potential trigger.

*Backward, Not Forward: Turkey is fast becoming a frontier market. The rise of President Erdogan looks to threaten generations of wealth accumulation and economic progress given his efforts to control the economy, capital markets (capital controls/litigation), and politics via a combination of: changing constitutional law; and whittling down central bank reserves and the TWF (USD 33 bn sovereign wealth fund);  increasing debt/GDP; the re-allocation of banking system capital for government spending;  and recent military incursions/ involvement (Syria, Libya, Azerbaijan, Greece, and Cyprus);  * Finding The Exit Door: There is clearly a payments crisis brewing for Turkey, which is likely to be quickly crystallized if TRL confidence is lost. For those Turkish exposed financials, the exit window is getting smaller assuming a steady state. Munich Re (MUV2.GY) was fortunate to exit (unit was small), Unicredit (UCG.IM) is trying to exit now, HSBC Holdings (5.HK) is purportedly still trying to exit, and some banks have simply reduced intragroup lines; and  *Market Black Swan: With Turkey extremely vulnerable to F/X rollover risks, the question remains as to who is going to provide the necessary financing to keep President Erdogan afloat. Turkey has all of the ingredients, in our view, to become Black Swan event markets with several factors including a move by MSCI to downgrade Turkey to a Frontier Market as a potential trigger. 

Turkey

Finansbank AS offers retail, small business, corporate banking, and credit card services through its branches in Turkey, the Netherlands, Switzerland, Romania, and Russia, and its Internet site.  The Group also offers life, health, traffic and other insurance, portfolio management, and leasing services.  Finansbank holds equity investments in department stores in Turkey.

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Finansbank AS/Turkey (FINBN TI)

Turkey – On The Brink

*Military Flashpoint With Greece: In late July, a Turkish seismic exploration ship (“Oruc Reis”) was sent to Kastellorizo, an island on the Greek...

Thomas J. Monaco

Turkey – Grand Experiment Is Failing

*Backward, Not Forward: Turkey is fast becoming a frontier market. The rise of President Erdogan looks to threaten generations of wealth...

Thomas J. Monaco

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