Emerging Markets are alive with elections just now. Hooray for democracy!!
We are often questioned on what we don’t own (Russia, Evergrande, Adani, Saudi Arabia) – more so than on what we do own.
Turkey falls into the former category. The reason is quite simple: although there are several consumer names on our Watch List and a couple on our Focus List, none have made it into the portfolio for a number of years. The reasons are simple: (i) there have been more compelling stocks elsewhere and (ii) the macro situation in the country has provided sturdy headwinds and political risk. As you know, over the last 10 years the Turkish Lire has gone from 1.85 to the USD to 19.76. Quite a challenge for even the best run company. Even more so for a USD based investor.
Little wonder that the stock market over the last decade or so has been lacklustre. It bucked this trend last year however, appreciating by over 137%. Improving fundamentals? Not a bit of it. Rather, beleaguered local investors trying to find a store of value with inflation raging at over 80%. Desperation or what?
Clearly with the macro situation deteriorating, the prospect for the end of President Erdoğan’s 20 years in power has been seen as a positive. But betting on a binary political outcome is always a dangerous game. Despite opposition parties banding together behind Kemal Kılıçdaroğlu and some encouraging showings in the polls, Erdoğan has a decent lead even if he did not manage to get over the 50% line that would have given him an outright victory. It seems he is the favourite in the run-off election to be held on this Sunday 28th May.
Whatever the outcome, it appears to us that there is better value elsewhere…
A PDF version of this article is available to download here.
The information contained in this article is published in good faith but no representation or warranty, express or implied, is made by Aubrey Capital Management or by any person as to its accuracy or completeness and it should not be relied on as such. This document has been issued by Aubrey Capital Management Limited (“Aubrey”), 10 Coates Crescent, Edinburgh, EH3 7AL (+44 131 226 2083). Aubrey is incorporated in Scotland, registered number: SC299239. Aubrey is an investment manager authorised and regulated in the UK by the Financial Conduct Authority (Reg. No. 455895) and is registered as an Investment Adviser with the US Securities & Exchange Commission (CRD No. 285802 / SEC 801-108789.) You should be aware that the regulatory regime applicable in the UK may well be different in your home jurisdiction. This document and its contents have been prepared solely for professional and institutional investors only, for information purposes and is not a solicitation, or an offer to buy or sell any security. This does not in any way constitute investment advice or an offer or invitation to deal in securities. Recipients should always seek the advice of a qualified investment professional before making any investment decisions. The information contained in this document is confidential and is intended for general information and may not be copied, reproduced, modified, translated, or transferred without the prior consent of Aubrey Capital Management Limited.
