Turkey produces best possible election result, says strategist

Turkish hatsThe Turkish election on Sunday that allowed the AKP to form a single-party government while denying them enough seats to call a referendum on constitutional changes was the “market’s best case scenario”, according to a strategist at a leading fund manager.

Abbas Ameli-Renani, emerging markets strategist at Amundi, says the result removes uncertainty about governability in Turkey in the short term. He adds that the performance of the Kurdish HDP in passing the 10% threshold was positive for stability.

The Turkish stock market, which had already gained nearly 9% in October thanks to polls indicating a single-party majority for the AKP, made further gains after the election, helping to recoup a decline earlier this year that lost about a third of the index value.

Some analysts raised concerns, however. Salman Ahmed, global strategist at Lombard Odier Investment Managers, says the AKP’s win, “raises the risk of further social divisions, if [President Recep] Erdogan uses the comprehensive win as a mandate to further his objective of a presidential system”.

Ameli-Renani admits Turkey faces challenges over its need for external financing. He predicts more pressure on the central bank to ease monetary policy and bolster growth, which, combined with high inflation, would be unfavourable for Turkish assets.

©2015 funds global MENA

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