A failed military coup in Turkey will deliver a short-term hit to portfolios while strengthening the position of president Recep Erdogan, say fund managers.
“It’s clear these coup plotters lacked any political (or PR) competence and probably have helped the AKP’s election maths,” wrote Renaissance Capital, a specialist emerging markets investment firm.
In a statement, the firm speculated that a snap election is likely, which could lead to a decisive victory for Erdogan’s Justice and Development Party, known as the AKP. Although markets might welcome the apparent stability of a strong AKP win, Renaissance Capital warned an “unrestrained” Erdogan could be bad for Turkey.
Julian Mayo, co-chief investment officer at Charlemagne Capital, also predicted an upswing in support for the Turkish president. “President Erdogan’s popularity will undoubtedly increase, providing him with a golden opportunity to further consolidate power,” he said.
Mayo said investors must decide whether Turkey’s path towards “a more autocratic executive presidential system” will impact their portfolios.
Some commentators sought to discern a positive future for Turkey. Christian Nolting, chief investment officer for Deutsche Bank Wealth Management, noted positive moves by the Turkish government to reassure investors by promising bank liquidity and a non-interventionist approach to the lira.
“In the short term, the failed coup should probably be seen as a shock to confidence – but with little immediate effect on the real economy,” he said.
However Nolting conceded that, given the other stresses on Turkey’s economy, such as the recent terrorist attack on Istanbul’s main airport, “investors could well stay wary for some time”.
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