Investor Sees Bright Future for Turkish Economy

Monday June 8th, 2009

Although the Turkish economy has been hit hard by the global crisis, Turkey is probably the country in Europe with the most potential, Marcus Svedberg, chief economist at East Capital said last week in a statement released by the Swedish fund management firm. Stockholm-based East Capital launched its Turkish fund in March 2006.

"The Turkish economy should be able to bounce back relatively quickly. It is relatively under-penetrated and Turks are quite unleveraged, which should be a boon these days," Svedberg said. Turkey’s banking sector has learned from previous crises and is surprisingly resilient with a capital adequacy ratio of 18 percent, Svedberg said.

"Moreover, the country is not very dependent on the weakening demand in Europe with a diversified and relatively low export dependency; exports make up less than 20 percent of gross domestic product and are spread on a large number of countries in Europe, Middle East and North Africa."

Emphasis on bank stocks

Approximately one third of East Capital’s Turkey portfolio consists of banking stocks listed at the Istanbul Stock Exchange. The remaining parts of the portfolio are made up of stocks in telecommunications, insurance, construction, oil and gas firms, as well as holding companies, pharmaceutical firms and real estate. The fund’s investments yielded a year-to-date return of 34.7 percent in euro terms in early June.

For Turkey’s reform process, it is of utmost importance the European Union keeps the prospect of membership "real and genuine", Svedberg said. "EU accession is not only an important goal in itself for Turkey, it could also serve as an effective external reform driver, helping Turkey to fully realize its potential sooner rather than later. A privileged partnership will not do the trick," he said.

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