Turkish Stocks Upgraded to Overweight by JP Morgan Chase & Co

Posted on 03 December 2009

Turkish stocks have been upgraded from neutral to “overweight” by major investment group JPMorgan Chase & Co. The group believes that the Turkish economy will recover faster than most emerging markets in 2010, though Turkish economy minister Ali Babacan‘s statement that a deal with the International Monetary Fund was on the cards was also a factor in JP’s decision.

“The International Monetary Fund stand-by program, if signed, should ease Turkey’s reliance on external financing and reduce the crowding-out of the private sector,” JPMorgan wrote. Turkish exporters will benefit from a recovery in European and Middle East demand, the note said.

The pending deal with the IMF has been driving Turkish stocks and the Lira up and down for several months now, many analysts had come to the conclusion that Turkey‘s economic revival and continued tourism growth would allow Prime Minster Erdogan to put off the deal until next year, and maybe permanently.

Turkey‘s economy is expected to have contracted 6.5% this year when the chips are down, according to the IMF. The body then forecasts a rebound to 3.7% growth next year. 3.7% growth is not spectacular for an emerging market, but given the substantial work needed to turn an economy from a severe contraction into positive growth, it is not surprising that 3.7% is among the highest growth forecasts for 2010.

What is surprising however is the effect JP’s announcement has had on the pound’s strength against the Turkish lira, or rather that lack of it. The pound is still riding high against the lira at 2.516. This is good news for Brits considering buying a property in Turkey, because it is still over 11% cheaper to them than it was in April.

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