Turkey: Improving investment grade status ?

Posted on 14 February 2011

Date: 26/08/2010
Turkey: Improving investment grade status ?

Turkey’s newfound reputation for financial stability is luring foreign investors, writes Delphine Strauss.

Turkey’s financial capital Istanbul‘s ISE100 equity index has hit record highs. Yields on sovereign debt are close to historic lows. The currency, the Turkish lira, is more stable than it has ever been.

All this is the result of a new reputation for stability that Turkey has established in the past two years: its solid banking system, robust public finances and strong growth prospects led UK Prime Minister David Cameron to assert, on a recent trip he paid to Ankara, that “Turkey is Europe’s BRIC”, referring to the four leading emerging nations, Brazil, Russia, India and China.

Policymakers aim to bring inflation down from a forecast 7.5 percent at the end of 2010 to a medium-term target of 5 percent, and to keep interest rates in single digits for a prolonged period. Rating agencies have signaled that the country is on track to reach the investment grade status.

“Turkey is emerging as a safer bet”, says Timothy Ash, an analyst at the Royal Bank of Scotland.

Ample liquidity and low borrowing costs have favored an equity market heavily weighted towards financial stocks; Turkey’s MSCI index outperformed the MSCI emerging markets index by 10 percent in 2009 and around 13 percent in the first seven months of 2010. Foreign investors own around two-thirds of stocks on Istanbul‘s exchange.

23 August 2010 – ISPAT

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