Morgan Stanley explains why investors like Turkey

Published 02.06.2016 00:40

After a meeting was held with fixed-income investors in London last week, the American multinational financial services company Morgan Stanley reported that investors have adopted a neutral stance regarding Turkish assets, claiming that the relatively positive macroeconomic indicators along with Turkey's consolidated political stability are the fundamental reasons for this approach.

Morgan Stanley recently published a report on the issue, examining the basic reasons that foreign investors have not changed their position on Turkish assets in spite of Middle East tensions and Turkey's establishment of a new cabinet.

According to report details, Morgan Stanley indicated that Turkey is still performing better than other emerging economies in terms of macroeconomic indicators. Furthermore, with Mehmet Şimşek holding his position in the Cabinet as deputy prime minister in charge of the economy, the report found that markets are relieved, as monetary and fiscal policies will not change considerably in the short-term. The report said, "The news that Mehmet Şimşek would retain his job within the cabinet created significant positive sentiment towards [Turkish] assets... The news would have reassured the market that economic policy, in general, would not take a significantly different course to that which we have become accustomed to in recent years."

Another reason for the stability in investors' perception of Turkish assets is that markets are convinced that the losses arising from the weakening of the lira can effectively be offset by the foreign currency sales realized by domestic investors. The fourth reasons given by Morgan Stanley state that there is no factor - not even a referendum -which could have an influence on political life in Turkey, signalling strong structure and the consolidation of political life.

Morgan Stanley expressed that it is surprised that investors maintained the positions when they adopted Turkish assets, indicating that, in the case of a steady rise in energy prices, further deterioration in the tourism sector and revamping efforts to restructure debt may change investor attitudes in the long term.

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