Turkey is a mess. President Recep Tayyip Erdogan has used a failed coup as a pretext to tighten his grip on the country, arresting 30,000 people, turning his back on free-market reforms and bullying the central bank into cutting interest rates.
Still, sometimes things get so bad it’s hard to see how they can deteriorate further, while some good news could give assets a hefty fillip. This seems especially likely if assets are cheap, and on this score Turkish stocks look appealing. They are on a 2016 price-to-earnings ratio of nine and a price-to-book-value ratio of 1.1, compared with 1.7 for Germany’s Dax, says Wirtschaftswoche.
The economy has also been pretty resilient, and the fundamentals are hardly dreadful. Growth of 2.7% has been pencilled in for this year. Inflation is under control and public debt is just 30% of GDP.
One catalyst for an equity bounce could be Erdogan restarting his structural reform programme in order to give growth a boost: he owes his popularity to the boom of the 2000s, and he can’t afford to alienate his supporters, reckons Wirtschaftswoche. Brave investors will be keeping a close eye on Turkey.