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Friday's EMEA Weekly

ByDanske Markets
Published 12/20/2013, 05:54 AM
Updated 05/14/2017, 06:45 AM

A major corruption scandal has hit Turkey this week. In raids earlier this week, at least 20 people including the sons of three top ministers were arrested on corruption charges. The arrests have sent shockwaves through Turkey's political establishment and the Turkish government has reacted angrily to the arrests.

There is no doubt that this week's events and the renewed spike in political uncertain is bad news for the Turkish markets and it is only natural that we have seen the Turkish lira selling off over the past couple of days. Looking ahead we would expect the lira to remain volatile going into next year.

However, it should also be noted that the lira is now trading at levels where, from a valuation perspective, it is attractive. Furthermore, the external environment is quite supportive for the lira. It is particularly positive that the Federal Reserve has been able to initiate tapering without having shaken global risk appetite. Furthermore, we expect oil prices to continue to decline during 2014. This is could be quite positive for Turkey and particularly for the Turkish current account situation - something that would obviously support the lira.

Concluding, this week's events are obviously not welcome news for the Turkish markets, but longer term we do not expect this to be a 'game changer' for the Turkish markets and we therefore do not currently plan to make any changes to our forecasts for the Turkish markets and the Turkish economy. We will, however, monitor the situation closely and adjust our forecasts if needed.

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