ANKARA: After record outflows this year, some investors are ready to pour money back into Turkey. There’s only one problem: no one can be quite sure who will be running the country.
As emerging-market investors search for havens to park their cash after China’s devaluation of the yuan, Turkey may be in line to gain if it becomes clear the country isn’t about to call repeat elections. Stocks, bonds and the lira tumbled today on concern Prime Minister Ahmet Davutoglu and the leader of the main opposition party will fail to agree coalition terms after an inconclusive general election in June.
“Turkey will strongly outperform if a coalition is formed,” Dmitri Barinov, who oversees $2.6 billion as a money manager at Union Investment Privatfonds GmbH in Frankfurt, said by e-mail on Wednesday. He’s ready to increase lira bonds from underweight if elections are avoided. “It’s a shame that one of the biggest profiters from the commodity slump isn’t taking advantage of it.”
The scope for a rebound in Turkey is underscored by the $4.4 billion of withdrawals from domestic bonds by foreign investors this year, driving the biggest emerging-market debt plunge and the third-deepest major currency retreat. Turkey relies more on Germany as its largest export market than on China, whose slowing economy could reduce global energy demand, pushing the price of oil down and helping to curb Turkey’s current-account deficit.
