We're not panicking after Turkey's failed coup – fund managers

Getty Images

People carry Turkish flags at Taksim Square in Istanbul

However they did express some nervousness about a possible authoritarian crackdown by President Recep Tayyip Erdogan in the wake of the weekend’s turmoil.

Turkey’s benchmark index, the Bist 100, had lost 8.8% in value as of 1445 London time on July 18 following the weekend’s events that saw a faction within its military unsuccessfully try to seize political control.

Matthias Siller, lead manager on Baring Asset Management’s £100.7 million Emerging Europe Plc fund, which as of May 2016 had a 27.7% exposure to Turkey according to its fact sheet, said he now sees “a lot of opportunities” to invest in the country, stating that its economic growth has until now stood up well compared to the rest of Europe and the world. According to Siller, Turkey was one of five emerging markets to have its GDP growth upgraded in the first half of the year.

He said “There are a lot of opportunities in Turkey and that has not changed in one weekend.

“In the long term, the stability of institutions in Turkey will be key and markets will evaluate this latest test. The Baring Eastern Europe Fund has been underweight in Turkey [relative to its benchmarks] and we still see a lot of opportunities. Now is not a time to sit on the fence.”

Julian Mayo, the co-chief investment officer of emerging and frontier markets specialist Charlemagne Capital, which manages $ 2.1 billion, said that the suppression of the coup was confirmation that Turkey’s democracy was strong, an encouraging sign for investors in the country. According to FE Analytics, Charlemagne’s Magna Eastern European fund had an exposure of 25.77% to Turkey as of July 18.

Mayo also said that the fact that the Turkish currency has since regained value after a steep fall was an indication that market believed the political and economic risk had decreased. The Turkish lira fell in value by 6% in the direct aftermath of the attempted coup, its biggest drop since the financial crisis, to 3.04 against the dollar on July 15, but has since recovered to 2.97 as of 14.21 BST on July 18.

Mayo said: Mayo said: “It seems to me that the fact we have had fairly broad support [in Turkey] for the democratic process definitely strengthens [President Recep Tayyip] Erdogan’s authority and ultimately political stability is first and foremost in investors’ minds.

“I don’t think we will be significantly reducing our weighing to Turkey as a result of this. We are genuine long-term investors.”

He said that the fundamentals for investing in Turkey’s consumer sector remain unchanged. However, he did voice concern that Erdogan’s subsequent attempt to reassert his control on the country may lead to a greater governance risk for investors. Some 6,000 Turks have since been arrested following the attempted coup.

He added: “What’s less encouraging is it’s given Erdogan an excuse to consolidate power even further. There is a risk of greater political involvement on the investment side.”

William Scholes, an investment manager at Aberdeen Asset Management who works on the global emerging markets team, said that political risk “is always a factor when investing in emerging markets”.

He added: “That said, companies in the country are among the best in emerging markets, despite the political environment. We look forward to political reconciliation as the ultimate legacy of these events, but as long term investors we won’t be making any snap decisions and remain believers in Turkey’s long-term domestic growth story.”

Colin Croft, a fund manager at Jupiter Asset Management, whose £88.8 million Emerging European Opportunities fund has a 19.1% exposure to Turkey according to FE Analytics, said that on a “net basis the fund is not likely to see a big hit even though the Turkish market is down 7% in [Sterling] terms”.

He added: “Let’s see what the number is later, but one might estimate an impact of no more than a couple of percent. The economic sectors most affected will be tourism and banking.”

UPDATE: This story has been updated to clarify that Baring Asset Management’s recent underweight on Turkey was in its Baring Eastern Europe Fund

More from Asset Management

Let’s block ads! (Why?)

Asset Management – Financial News Online

You May Also Like