Der gesamte Kommentar von Ghadir Abu Leil Cooper, Fondsmanagerin des Baring Eastern Europe Funds, in englischer Sprache:
There has been some concern in the press about political developments in Turkey over the last few days, and this has been reflected in some weakness in equity and bond markets as well as in the Turkish lira. While we are monitoring the situation closely, we do not believe that investors should be unduly concerned, and our expectation at the moment is that we would be likely to use any significant weakness in the local currency bond market or in the Turkish lira to add to our exposure there on a medium to long term view.
The controversy has centred around the election of the country´s President, elected by Parliament after nomination by the Prime Minister. Since 2002, Prime Minister Erdogan´s Islamist Justice and Development Party, the AKP, has had a dominant majority in the Turkish Parliament despite having only secured 30% of the popular vote, owing to the minimum 10% threshold required to gain Parliamentary seats. Last week, the sole candidate for the Presidency, Foreign Minister Gul, appeared initially to get the two-thirds majority required to come through the first round of voting.
Even though the government has stated its commitment to secularism, Mr Gul is conservatively minded with a wife who wears a headscarf. As Head of State and representative of the Republic of Turkey, his nomination has aggravated many voters, who are concerned that the AKP party would use control of Parliament and the Presidency to move Turkey towards Islamic rule. This has manifested itself in large street demonstrations in Istanbul and Ankara opposing the religiously minded Gul as President and in support of secularism, as well as a warning from the Turkish army on Friday that they would defend secularism and, when necessary, display their attitudes and action very clearly. The army has a history of active intervention in politics as guardians of the secular state and, not surprisingly, this has prompted something of a sell off in Turkish financial markets in recent days.
Earlier this week, the Turkish Constitutional Court ruled that the Parliamentary vote for Mr Gul was unconstitutional on the grounds that there were not sufficient legislators present to form a quorum, as the opposition had decided to boycott the vote. In response, Prime Minister Erdogan called for a constitutional amendment to allow the President to be elected by popular vote rather than by Parliament, and suggested that new Parliamentary elections could be brought forward from November to the end of June this year.
This latest development is welcome and we believe it is likely to help defuse the situation. Our view has long been that Turkey is likely to continue to converge politically and economically with the European Union, with benefits both for financial discipline and for companies operating in Turkey, and we see no reason currently to change this view. It is noteworthy that the sell-off in Turkish local currency debt and the lira has been modest, in the region of 150 basis points on short-dated Turkish bonds and an initial sell-off of 4% in the Turkish Lira, the latter subsequently recovering back to pre-political crisis levels.
On the bond side, we have exposure to the Turkish market primarily in the Baring High Yield Bond Fund and the Baring Emerging Markets Income Fund. On the equities side, we believe Turkey is one of the most attractively valued investable equity markets in the world, with the MSCI Turkey Index trading at just 9.5 times estimated 2008 earnings. We remain invested in Eastern European portfolios, and we have significant exposure in a range of our Emerging Market equity funds, Eastern European funds, and, both directly and indirectly, in a number of our Multi Asset portfolios.
