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Capital Markets

Turkey: Sweet fruit for the patient investor

Turkey has been in a state of turmoil for the past year. The political troubles are home-grown; the economic woes have come from abroad. Both problems appear worse than they really are and present opportunities for those who can hold their nerve.

An old Turkish proverb has it that patience is bitter, but it bears sweet fruit. Judging by the events of the past few months, foreign investors seem to have decided not to put up with the bitter part. But in Turkey, bankers and other businesspeople warn that those who are intimidated by the current turbulence might miss a unique opportunity to grab the sweet profits that are waiting on the other side.

Since last May, when the US Federal Reserve announced its intention to taper its quantitative easing programme, the Turkish lira has fallen by around 30%, the MSCI Turkey index has slipped over 40% and government and corporate bonds have repriced higher by between 100 and 150 basis points. And, as if the Fed’s disruptive signal for emerging markets were not enough, Turkey’s prime minister, Recep Tayyip Erdogan, took a series of measures that instilled fear among the secular, liberal middle class at home and did more than raise a few eyebrows abroad.

First there was the brutal crackdown on protesters in Istanbul’s Gezi Park in June; five people were killed and it is estimated that more than 8,000 were injured. Since the protests, freedom of expression has been under assault in a country that the Committee to Protect Journalists named "the world’s leading jailer of journalists" last year.

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