Political risk and investing in Turkey – interview with Tim Ash from Standard Bank

Originally appeared on Bosphorus Consulting on 15 March 2014

With the ongoing investigations into alleged corruption in Turkey, markets have taken quite a hit. A recent Bloomberg article described Turkey as a “troubled market” (“Turkey Stocks Worst-Performs in World Offer Value, Hermes Says,” 4 March 2014). The article went on to suggest, however, that now is a good time to invest, while prices are lower.

Emre Deliveli, writing for Hürriyet Daily News & Economic Review, strongly disagrees with anaylsts who hold this postion. Deliveli believes that political risks have not been adequatley considered in share pricing and evaluations of the Turkish economy, claiming that we will not have seen the full extent of the political turmoil gripping Turkey until at least after the elections at the end of March (“Have Turkish political risks been priced in?” 28 February 2014). In other words, the situation could still get worse.

Tim Ash, from Standard Bank, in an interview with Bosphorus Consulting, stated that he is optimistic about the Turkish economy, broadly speaking, and agrees that there are postive signs for investors. However, he also acknowleges that the economic outlook will be hugely influenced by the results of the upcoming local elections, noting that, “In no other country is a local election so important.” Moreover, he adds that we are all very much “in the dark” with regard to the ramifications of the elections and their consequent effect on political stability.

Long-term he feels that Turkey may be moving towards an “Asian model of devlopment,” resembling Russia or Malaysia, characterized by a strong power vertical, in other words with a more authoritarian and centralized style of governance. Such an environment can be largely unproblematic for business, he adds, if the rule of law is respected and corruption is kept at bay as in the case of Malaysia, but he fears this will not be the case for Turkey.

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