Turkey

Formerly a darling of emerging market investors, Turkey has come under a lot of scrutiny in recent months, as the political and economic environments have deteriorated. Turkey’s stock market has underperformed emerging markets by 12.4 per cent this year, and valuations for the market are cheap on both an absolute basis, with single-digit P/E ratios, and a relative basis, where the P/E is at a substantial 25 per cent discount to EM.

Despite this, there are several reasons why now is not a good time to buy Turkish equities. Read more

The 2014 Ukraine crisis reinforced the EU’s quest for security of gas supply. The European Commission released an Energy Union Communication in February, calling for intensified work on the Southern Gas Corridor (SGC) and for the establishment of a new strategic energy partnership with Turkey.

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Turkey’s recent initiatives within Nato are remarkable but, even so, may not be enough to secure the trust of its western partners. In the current geopolitical context, the new Turkish government’s ability to address deep-routed concerns over its foreign policy will be limited unless it takes comprehensive action. A loss of trust brings costs for Turkey, limiting its capacities in the transatlantic community.

At the Nato meeting of foreign ministers in Antalya last month, Turkey took the opportunity to demonstrate its commitment to the transatlantic alliance by offering to be a lead nation for Nato’s Very High Readiness Joint Task Force by 2021 – an initiative designed to deter Russian aggression after its annexation of Crimea. Turkey has recently donated $800,000 to Nato trust funds for defence capacity building in Iraq, Moldova and Jordan. In normal times, such initiatives would be seem as commonplace for a country known for its staunch commitment to Nato. This time, they weren’t. Turkey’s actions positively surprised its western partners, who have grown sceptical about its place in the alliance. Read more

This Sunday, Turkey heads to the polls for its parliamentary election. The outcome will be pivotal for the country’s future.

The election is the culmination of a political race started 13 years ago by the Justice and Development Party (AKP) and its leader Recep Tayyip Erdogan, who is seeking to change the constitution and make Turkey a presidential regime. Read more

Blink and you missed it. The day after the US Federal Reserve appeared on Wednesday to put back the date of its long-awaiting interest rate rise, analysts at Bank of America Merrill Lynch wrote to clients: “Emerging market currencies temporarily halted their losing streak with a dovish Federal Open Market Committee sending the USD lower.”

“Temporarily” is right. The Brazilian real closed at about R$3.21 to the dollar on Wednesday from its open of R$3.24, a rare day’s gain in a two-month slide. But on Thursday it was back on course, falling quickly beyond R$3.30 before recovering a bit, an intraday move of nearly 3 per cent. In less dramatic manner, the Turkish lira, Russian rouble and South African rand all resumed their downward slides, too. Read more

A long awaited plan by the European Union to import Caspian gas moved forward this week as construction work began on the Trans Anatolian Natural Gas Pipeline (Tanap) in Turkey.

Tanap is the central link in the EU-backed Southern Gas Corridor, a jigsaw of existing and planned pipelines designed to diversify Caspian energy export routes and reduce European dependence on Russian gas. Initially, the 3,500km SGC network will transport gas from the giant, BP-led Shah Deniz field in offshore Azerbaijan, but could in future draw supplies from other Caspian and central Asian countries and even the Middle East, changing the energy map of the whole region. Read more

Turkey FT special report Tayip ErdoganThe Turkish government’s decision last month to ban a metalworkers’ strike on the grounds that it endangered national security is part of an familiar pattern in the country. At least nine other strikes have been similarly stopped since the year 2000.

This time, though, the Turkish government outdid itself in explaining how the labour action could be considered an issue of national security. It said that the strike by Birleşik Metal-İş (United Metal-Work), a union representing just two per cent of Turkey’s million-plus metal workers, would jeopardise production of the Turkish police’s water cannon trucks – the very vehicles that are used to suppress labour unrest and other protests. Read more

Is it time to quit as central bank governor if the president of your country suggests you could be a foreign agent? The answer to this not necessarily run-of-the-mill question may well help determine Turkey’s economic prospects.

On Wednesday, President Recep Tayyip Erdogan all but accused Erdem Basci, the central bank chief, of working for Turkey’s enemies. Read more

Turkish lira per US dollar, 3 months to Feb 4. Source: Thomson Reuters

The Turkish lira went on a fresh slide on Wednesday, adding to its losses over the past fortnight. Investors have no doubt been alarmed by the pressure piling on Turkey’s central bank from the luscious new presidential palace in Ankara. But the lira’s new weakness may also signal an unwinding of some strongly bullish positions on Turkish local debt taken by foreign investors in recent months. Read more

Turkey’s exports are down – not exactly the most welcome piece of news as the country casts around for a new economic model to take over from its largely debt-fuelled growth of the last half-decade. A single month’s worth of data does not a trend make, particularly when the figures concerned come from an industry body rather than the official statistics institute (which takes about a month to compile its own tally).

But the press release issued on Monday by the Turkish Exporters’ Assembly makes for grim reading all the same. It indicates that the European Central Bank’s recent experiment with quantitive easing, and the euro’s accompanying weakness, may not be all good news for Turkey, which relies on the EU as by far its biggest market. Read more

TRY per USD, week to Jan 16. Source: Thomson Reuters

Turkey’s President Recep Tayyip Erdogan has got embroiled in interest rates again – and the country’s currency immediately felt the impact.

Erdogan’s allergy to high interest rates is well known, as is his insistence that there is something out there called “the interest rate lobby” that drives rates up in a bid to enfeeble the Turkish economy. But all the same he was in fine form in a speech on Friday. Read more

The Turkish lira rounded off the week by tumbling to its lowest levels against the dollar for almost a year, amid investor nervousness about
emerging markets.

By evening trade in Istanbul the currency had fallen beyond TL2.30 to the US dollar, more than 1 per cent down on the day and the weakest level since January, when the Turkish central bank moved to increase
interest rates – a dramatic shift in policy that at the time halted a
precipitous drop in its value. Read more

By Riccardo Puliti of the EBRD

Until recently the Nabucco pipeline, just like the chorus in Verdi’s opera of the same name, was a symbol of freedom. It was designed as an alternative route for large quantities of natural gas coming into Europe, reducing the continent’s dependency on the Soviet-built pipeline system that runs from East to West.

But the Nabucco dream did not become reality, mainly because it would not transport enough gas to make it viable and especially because Turkmenistan, a big producer of natural gas, was not part of the project. However, this vision of independence could yet live on in another guise – but only if there is the political will to drive it forward. Read more

Perhaps only President Recep Tayyip Erdogan of Turkey would exclaim “I am increasingly against the internet every day” in the middle of a private meeting on press freedom.

That indeed is what the outspoken Turkish leader just did, according to the Committee to Protect Journalists (CPI), which met Erdogan in Ankara this week, together with the International Press Institute (IPI). Read more

Turkey is in an uncomfortable place. Amid a general turn away from emerging markets, fuelled by the rise of the dollar and expectations of US rate rises, the Turkish economy is, if not in investors’ crosshairs, close to the centre of concerns.

The lira is skirting seven month lows, undermined by worries about the country’s fundamentals (notably its high current account deficit), its geopolitical position (bordering Iraq and Syria, not to mention the jihadis of Isis) and more besides.

That makes the difference between what appear to be two schools of thought within the Turkish government particularly important. Read more

Poor forward planning and political manipulation of energy prices look likely to leave Turkey facing gas shortages this winter, even before the prospect of regional gas cuts due to the on-going hostilities in Ukraine.

Turkey last week experienced an unexplained drop in pressure in its western import line, through which it receives 14bn cubic metres (bcm) of gas from Russia, or about 30 per cent of Turkish demand. That sparked fears of further cuts during the peak mid winter demand period should a working ceasefire not be concluded.

But Turkey’s gas woes are not confined to one import line through Ukraine. Read more

One of the biggest questions facing Turkey is not so much who is going to win Sunday’s inaugural presidential election – prime minister Recep Tayyip Erdogan is heavily favoured – but what kind of government the country will have afterwards.

If Erdogan does head to the presidential palace later this month, so vacating the premiership, a new government will have to take office-even though he has made clear his ambition to keep running the country. Read more

Here’s an example of what may pass for high finance Turkish style: talk down an asset and then try and nab it for yourself.

This may not be a path that is permitted for non-governmental actors, but then sometimes it seems that all roads lead back to the country’s government, notably its powerful prime minister Recep Tayyip Erdogan.

Last week, he was quoted as lashing out at an Islamic bank in Turkey named Bank Asya. Read more

Turks are divided over the Prime Minister Recep Tayyip Erdogan, according to a new poll conducted by the US think tank Pew Research Center ahead of the country’s first presidential elections.

The survey, carried out in April and May, found a majority of 51 per cent dissatisfied with the direction of the country with only 44 per cent satisfied and an even split on the question of whether Erdogan’s influence has been good or bad with 48 per cent of Turk’s taking either side. Read more