This summer has brought an unexpected and unpleasant surprise for small and medium-sized investors: the economic crisis in Turkey. This crisis has caused the national currency, the lira, to plummet sharply in the financial markets. While the stock markets in Europe have suffered the most from its collateral effects , the Spanish markets, in particular, have been particularly hard hit due to the significant presence of some of its most prominent companies. For this reason, it is no surprise that the benchmark Spanish stock index, the Ibex 35, has been one of the worst performers in recent days.
What's happening in Turkey is a factor investors hadn't anticipated, and it's certainly causing them to lose a lot of money , especially if their positions are exposed to certain domestic market stocks. Now it remains to be seen whether this economic downturn will last only a few days or, on the contrary, extend for a longer period. It could even arrive after the holidays, leaving you no choice but to reconsider some of the investments made this year.
The economic crisis in Turkey is certainly more serious than it initially appears because it could end up affecting other economies worldwide. And among these, of course, is the Spanish economy, for the reasons outlined above. Now we need to determine which stocks are most vulnerable to these events in the equity markets. Because many more stocks are exposed to this crisis than you might initially think. So much so that this could be a starting point for reducing positions in them to avoid future problems managing savings.
Affected by Turkey: BBVA
There is no doubt that the financial group chaired by Francisco González has been the hardest hit by these large stock market fluctuations. Indeed, it has lost over 5% of its share value on the trading floor. This is due to its direct exposure to Turkey, with the presence of other financial groups from the Ottoman country. For as long as this significant economic crisis lasts, the only solution is to stay away from this bank's shares, and perhaps even the best course of action. Among other reasons, this is because you could lose much more money from this point forward. BBVA's exposure to Turkey is one of the highest among European banks.
Conversely, if you don't have any open positions in this stock, it's best to continue as you are. This will be the best way to protect your savings above all else. Furthermore, you'll have time to make trades later, perhaps at a much lower price than it's currently trading at. In any case, you shouldn't act on emotion, but rather with great caution, remembering that you are ultimately risking your money. This bank is among the first to be negatively impacted by this unexpected monetary and economic crisis, regardless of what may happen in the coming weeks or even months.
All banks in general
Another loser in this unique crisis is the banking sector as a whole. It's crucial to remember that this segment has suffered the most losses during this period of selling pressure in equity markets, both for Spanish and European banks. While not as directly exposed as BBVA, you should avoid prioritizing it over any investment strategy you may adopt starting this summer, which is drawing to a close.
For this reason, it is very important that you do not expose your positions to any financial group, not only those from our country but also those from across Europe . This is to avoid problems arising from what might happen in Turkey right now. There's nothing better than being proactive to protect your investment assets. In any case, it will be the best strategy to avoid financial difficulties, because the banking sector is one of the most vulnerable to events in this region.
Inditex in the spotlight
Another major casualty is the Galician textile company. Its exposure to Turkey has been steadily increasing, and its financial statements could be significantly impacted by the fluctuations in its currency, the Turkish lira . This could certainly be a major blow to its business interests and even lead to a depreciation in its share price. Despite these technical factors, which remain very positive for investors, the company's stock has recently declined, with a valuation of less than 3% compared to its pre-market prices.
It's important to remember that Inditex was poised to recover the upward trend it had recently lost. This has dashed the financial markets' expectations for this important Spanish stock. Furthermore, it's worth noting that the textile company, with its significant presence in Turkey, is also crucial for the two leading Spanish textile companies, one of which is the well-known Mango. Both companies have positioned Turkey as a key market within their production models. In the case of the Galician company, Turkey, along with Spain, Morocco, and Portugal, accounts for more than half of its production.
Mapfre with its confidence in Turkey
As for the Spanish insurance company, it was one of the stocks that placed great hopes on the country in 2014. In fact, they expected to double their market share there from 5% to 10% or 15% , although they failed to achieve this and even recorded declines in profitability in Turkey in 2017. Currently, these forecasts have fallen apart, leading to a clear increase in selling pressure compared to buying pressure. Consequently, their investors are witnessing the stock price depreciate during this unusual summer period.
On the other hand, other major financial institutions with significant interests in Turkey include Caixabank and Banco Sabadell , although banks are not the only sector holding stakes in IBEX 35 companies, as we have highlighted in this article. Therefore, extreme caution is advised when investing in these companies. Any type of transaction carries a very high risk, with small and medium-sized investors having far more to lose than to gain. This is precisely the scenario presented by the monetary and economic crisis in Turkey.
European securities at risk
It's not just equities that are exposed to risks centered in Turkey. Financial groups with a presence in European countries are also affected. In this regard, it's worth mentioning financial institutions of particular importance, such as Unicredit and BNP Paribas . These companies have been among those punished by the stock markets in recent days, surprising many small and medium-sized investors. In any case, this hasn't prevented stock market indices from falling sharply and against the trend that had prevailed until then. And this is all the more likely to happen in the coming weeks, and the situation could even worsen.
Beyond what is happening with the shares of the Spanish bank BBVA, which is the most affected Spanish company, Turkey stands out as one of the largest destinations for Spanish exports outside the European Union. This is another worrying aspect that could have repercussions, in this case, on the national economy , separate from what is happening with the stocks listed on the main stock market indices in our country.
Exhibition of Spanish SMEs
In this regard, and according to the latest data provided by ICEX, exports to Turkey reached €5.700 billion in 2017. This represents growth of more than 10% compared to the previous year and, in any case, the highest level ever achieved in this type of trade. Furthermore, this is especially relevant for all those small and medium-sized enterprises exposed to the risks of the Turkish lira's depreciation.
Among those that stand out are the vehicle manufacturers in Spain, since it is the fifth buyer of Spanish cars in the world and the first outside the EU. Although none of them are listed on the equity markets.