Investment bank JP Morgan today recommended investors
increase holdings in Turkish stocks after six months of remaining
neutral on the Turkish economy.
[caption id="attachment_63774" align="alignright" width="300"
caption="Time to buy in Turkey"]
JP Morgan analyst David Aserkoff advised piling into the shares
of three top Turkish banks -- Halkbank (
), Garanti (
) and Vakifbank (
) - as well as diversified conglomerate Koc Holding (
The Turkish economy was one of the fastest-growing in the world
last year, expanding by about 8%. The stock market has been an
outperformer among emerging markets, losing a mere 4.4% of its
value over the past year compared to a 19% drop in the global MSCI
Emerging Markets index.
But the growth was fueled by a credit boom, and much of the
money Turkey's 73 million citizens borrowed was spent on imports,
swelling the country's current account deficit (the gap between
imports and exports) to a dangerous 10% of gross domestic
This imbalance, combined with Turkey's traditional dependence on
Europe as an export market, spooked investors during the latest
global market downturn. The commonly traded iShares Turkey Index
) dropped by 14% during April and May.
The fund has bounced back by 7% this month. Morgan's Aserkoff
predicts this is just the start of a rebound for the Turkish
economy. The country's
current account deficit has dropped for six straight
as Turkey's central bank cooled the population's spending spree by
raising interest rates and letting the Turkish lire slide against
The current account gap is heading for 8% of GDP, a level
Aserkoff describes as manageable. Turkey is also effectively
shifting its exports away from a struggling Europe toward growth
markets in the Middle East and former Soviet Union, the analyst
The Turkish economy is now JP Morgan's favorite market among the
emerging economies of Europe, the Middle East and Africa, or CEEMA
in brokerage jargon.
The bank also maintains an "overweight" recommendation on South
Africa. It is neutral on Russia and Egypt, and underweight on
Central European markets Poland, Czech Republic and Hungary.