Turkey turmoil affects Malaysian firms

by **Cals** Wed 29 Jan 2014, 08:19

Published: Wednesday January 29, 2014 MYT 12:00:00 AM
Updated: Wednesday January 29, 2014 MYT 7:37:32 AM
Turkey turmoil affects Malaysian firms
BY IZWAN IDRIS

PETALING JAYA: Volatility in the foreign exchange market is wreaking havoc on Malaysian companies with big business overseas particularly those with operations in Turkey as it is among the hardest hit following the plunge of the lira.
Malaysia Airports Holdings Bhd (MAHB) had said that its unit in Turkey, IstanbulSabiha Gokcen International Airport, reported higher losses in the quarter ended Dec 31, 2013.
Another company that could be affected by the turmoil in Turkey is IHH Healthcare Bhd.
Analysts said IHH derived 40% of its revenue from 65%-owned Acibadem Bodrum, the operator of 15 hospitals in Turkey.
Khazanah Nasional Bhd owns substantial stakes in both MAHB and IHH.
The Turkish central bank had called for an emergency meeting following a sharp fall in the lira against the US dollar, leading to speculation the central bank may raise interest rate to shore up its embattled currency. Emerging market currencies across the globe have tumbled in recent weeks as foreign investors pulled out funds ahead of the widely anticipated move the US Federal Reserve to further reduce its bond buying programme from US$75bil a month to US$65bil.
Economists at Capital Economics cited Turkey among countries most vulnerable to the US Federal Reserve’s move to reduce its stimulus programme. The country is one of the so-called fragile five major emerging economies that also include Brazil, South Africa, Indonesia and India.
But the problem in Turkey, once a darling among investors, has as much to do with its shaky economic fundamentals and domestic political woes.
The lira had tumbled 12.4% against the US dollar since the end of October, faster than the South African rand’s 11.3% drop and Indonesia rupiah’s 9.3% decline over the same period.
MIDF Research said yesterday that these countries were suffering from twin deficits issues, both on its external and fiscal accounts. While the firm ruled out the risk of widespread contagion, Malaysia’s relatively weak albeit improving current account situation would limit the upside for share prices on Bursa Malaysia going forward.