Analyst: Upcoming months will tell why Templeton sheds debt


Emerging Market specialist Franklin Templeton Investments could have reduced its Hungarian debt exposure to compensate its losses in Ukraine, and has so far caused no substantial market tension, CIB analyst Mariann Trippon told the Budapest Business Journal today.

Templeton is the largest holder of Hungarian debt and the largest player on the market. György Barcza, head of the Government Debt Management Agency announced today on state television that Templeton had already sold approximately 20% of its HUF 2 trillion portfolio of Hungarian government securities, apparently all during the first quarter.

But according to Trippon there may be no cause for concern. "On the one hand it is unfavorable, as it is not optimal if government securities are owned by one entity, because if they sell this can cause market tension," Trippon said. "On the other hand, because it is such a large player on the market, it cannot sell its own government securities all at once, as this would cause them serious losses as well," Trippon added.

“Government securities owned by foreigners declined slightly, but we do not see a significant decrease at the moment, as such those securities that were sold were partly absorbed by other players” Trippon said.

According to Trippon, if Templeton reduced its debt exposure because of the Ukrainian issue, this would imply that it is not planning on abandoning Hungary. If it is planning on leaving the country “it will gradually sell its securities”, Trippon said, however, if this this does happen, she does not expect a fast sale as it is “not in [Templeton’s] interest to wreck its own market.”

“It is the [Hungarian] state’s aim to strengthen internal financing, in other words to distribute state debt among domestic players such as households, companies and banks,” Trippon said. She said she believes that the following months will reveal how the expected worsening of the external environment will affect the Hungarian government securities market. “We do not expect the collapse of the market in the coming months, but record-low yields would be impossible to maintain,” Trippon added.

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