One trader lost $19 million on the Turkey turmoil — here are the winners and losers from the crisis, by Will Martin
- The collapse of the Turkish lira is the big story in global markets.
- A big winner has been Deutsche Bank’s CEEMEA desk, which made $35 million over two weeks on the back of emerging market turmoil, according to Bloomberg.
- But a Barclays trader lost $19 million trading Turkish bonds over three days.
- Millennial investors in the US have also been stung by the turmoil.
(Business Insider) Markets have been gripped by the developing crisis in Turkey over the last few weeks.
The country’s currency plummet, contagion spread to other emerging markets, and a war of words broke out between President Erdogan and President Trump.
Traders love a crisis. A crisis tends to create volatility, which creates the opportunity to make larger sums of money by betting on price moves. The reverse, of course, is also true: losses tend to be greater in times of volatility.
It’s no different with the Turkey situation, with several media reports of large financial institutions making and losing large sums of money.
The biggest win reported so far is at Deutsche Bank, where a group of fixed income traders made a profit of $35 million in less than two weeks, according to a report published by Bloomberg.
The traders, who trade from a desk “focused on central and eastern Europe, the Middle East and Africa,” made as much as $10 million in a single day on August 10, which saw the biggest fall in the Turkish lira, Bloomberg’s story says citing people with knowledge of the matter.
Prior to the lira’s slump, the team had positioned itself to profit from falling asset prices across the region, although it is not believed that they had placed any trades specifically focused on the Turkish crisis.
The desk from which the profits came has reportedly made $135 million this year, trading products connected to credit in the region.
Deutsche Bank declined to comment when contacted by Business Insider.
But not everyone is having a good time
That figure is relatively small in the grand scheme of Barclays’ emerging market corporate fixed-income trading operation, from which the bank makes revenues of around $100 million per year, but still represents a significant amount of money.
“Barclays has an established and diversified credit business with all our trading positions hedged across the business,” the bank said in a statement provided to Bloomberg. It added that its Turkish trading operation “represents a very small part of our overall credit business.”
Barclays declined to comment further when contacted by Business Insider.
Other investors to be stung by the Turkey crisis include millennials using popular platforms like Betterment and Wealthfront. The businesses, which are two of the most popular online investment platforms in the US, are both top 10 holders of the Vanguard FTSE Emerging Markets exchange-traded fund.
The fund makes up as much as 15% of some portfolios on Betterment. The Vanguard ETF has lost more than 7% of its value since the start of August.
Turkey’s crisis has spiralled in recent weeks, with a sharp fall in the Turkish lira the most obvious impact.
The lira’s initial slide came amid rising tensions between the US and Erdogan over trade. US President Donald Trump authorized increased tariffs against Turkey on Friday in response to Turkey’s unwillingness to release an American evangelical pastor, Andrew Brunson, who has been imprisoned in the country since late 2016.