Investors Shying Away From Turkey

The case for returning to Turkish assets after this year’s sell-off may be growing, but there’s no shortage of risks investors must weigh before taking the plunge in 2018, while in neighboring Greece a potential property market boom is drawing a wave of investor interest. “2018 is going to be another volatile year in Turkish markets,” says Per Hammarlund, the chief emerging market strategist at SEB in Stockholm. “Any change in the outlook for global monetary policy will have an outsize impact on Turkish bonds and the lira," Bloomberg reported. The Turkish lira has not been this cheap relative to its trade partners in more than a decade, local bonds boast some of the highest nominal yields among major economies and stocks are trading near the widest discount to other emerging markets in more than eight years. To counter that, inflation is more than double the central bank’s target, relations with western allies are strained and there’s a prospect of early elections, something the ruling AK Party has repeatedly ruled out. Those are among the reasons Turkish assets are among the most vulnerable to shifts in appetite toward emerging markets. With price increases running at the fastest pace in 14 years, investors are assessing how serious the central bank is about containing further deterioration.