Turkey’s currency “undervalued” and could strengthen in 2014, says international bank

Turkey’s currency is undervalued and in line to strengthen in 2014 when the country’s economy will continue to outperform the rest of Europe, said a leading international finance house in Istanbul in November.

Societe Generale (SocGen) told Bloomberg this month that investors should buy the lira against the euro as Turkey offers some of the best growth prospects in emerging markets.

A SocGen spokesperson commented: “If you’re talking about growth reviving next year in emerging markets, which it seems to be doing, you cannot afford to miss out on Turkey – it is the best in the region in terms of growth performance.”

The Turkish Government is expected to hit its 2013 GDP target of 3.6 per cent, the country’s Industry Minister Nihat Ergun told parliament this month. Next year, GDP is predicted to increase four per cent, according to the average of 33 economist estimates on Bloomberg. That compares with a three per cent forecast on average for emerging  Europe, the Mideast and Africa.

SocGen labelled the Turkish lira as the most undervalued currency in emerging markets.
“The shock emerging markets are going to see next year is only temporary,” SocGen’s head of emerging-markets strategy said. “Turkey was excessively penalized by the markets and the Turkish lira, tactically, I’d buy it.”

This week the International Monetary Fund backed the Turkish central bank's moves to signal more tightening of day-to-day monetary policy, but also called for more steps to guard against capital outflows.

Foreign property investors in Turkey are advised to monitor the exchange rate carefully during a property transaction, and if necessary consider forward purchasing lira - or whichever currency they are purchasing in - in order to minimise their exposure to the exchange rate.

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