schreef:
In Turkey’s case, net debt has fallen from 91 % to 58 % of GDP over the last four years – going from Italian levels to Swedish levels. This is a great achievement, which means that Turkey now fulfils the Maastricht criterion in this area. Despite these factors, both the currency and the market lost a lot of ground due to interest rate concerns. So what is going on?
The answer lies in the vast amount of short-term investments that are made worldwide for quick returns. Unfortunately, it is also safe to say that these investments are somewhat uninformed and in markets about which the investors lack knowledge. We are of course aware of this phenomenon, but were a little surprised about the enormous amount of these”carry trades” in Turkish Lira that were sold in a very short time. For these transactions, an investor borrows money in a currency with low interest rates, such as USD, EUR or YEN. The money is then invested in a currency with higher rates, such as the Turkish Lira. This is fine as long as there are no concerns on the interest rate markets. But when there are, everybody wants to sell these positions at the same time. This was the case in May, causing the Turkish Lira to lose 15.9 % against the usd and 18.0 % against the sek. Over the same period, the Turkish stock market lost 13.1 % in the local currency, and our Turkish fund fell 27.9 %.
This is of course unfortunate, but we would like to once again emphasise that our long-term view of Turkey has not changed, and this should be seen more as a buying opportunity than a selling one.