Traveling in Turkey

In recent weeks, protests in Turkey have made headline news, with the instability transferring to the local stock market. Since the riots began around June 3, the Borsa Istanbul Stock Exchange National 100 Index has declined 11.9 percent.

Portfolio Manager Tim Steinle was traveling in Turkey recently and has a slightly different take on the situation than mainstream U.S. news. He says that while volatility may continue in the short-term, it is unlikely to pose a threat to the market in the long run.

He says that many people have analyzed the country’s protests from an “Arab Spring” perspective, but this may be a flawed comparison. The demonstrations seem to resemble the Russian protests ahead of Putin’s reelection last year, which were voicing opposition to the suppression of political freedom. The “Arab Spring” included mass protests against authoritarian states whose citizens are poverty stricken and are prepared to unleash serious violence, for they really have nothing to lose.

In the case of Turkey, the protesters are relatively prosperous members of the middle class with jobs and rising purchasing power. To us, this means the current situation in Turkey likely won’t last.

As such, the fundamental valuation metrics have not changed and Turkish equities appear to be undervalued at current levels, extending a new opportunity to add exposure to the country.

In our latest Shareholder Report, we focus on the long-term drivers of Turkey’s growing economic strength unlike other areas of the world where high debt reigns. Download your copy today.

The Istanbul Stock Exchange National 100 Index (XU100) is a capitalization-weighted index composed of National Market companies except investment trusts. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.