The Global Insider Country Focus: Turkey

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As the antigovernment protests in Turkey continue, what’s next economically for a country that relies heavily on foreign investors and tourism, especially with summer approaching, the traditional tourist high season? Accuvest Global Advisors, a firm founded on the principle of thinking globally and investing globally, has prepared the following focused country review on Turkey, which analyzes current risks with Turkey and potential next steps in the crisis.

The Market

In United States Dollar (USD) terms, the MSCI Turkey Index has lost -22.10% since May 8, 2013. The index has lost 8.70% year-to-date, and remains up 28.40% over the last 12 months.

The Story

June Country Ranking











Qualified countries are ranked based on their inclusion in the MSCI All Country World Index (ACWI) and there must be an ETF that tracks the performance of the qualified country’s stock market. Data of these qualified countries are used to compare factors classified within 4 groups: Fundamental (e.g., Economic growth, earnings), Momentum (e.g., price movement, mean reversion), Risk (e.g., volatility, currency), and Valuation (e.g., absolute, relative).

The Turkish protests were sparked by an initiative of the country’s political leadership, the AKP – Justice and Development Party of Turkey, to re-develop one of the last and only green space parks of Istanbul, Taksim Square, into a mall/opera-house/park. The Turkish police responded to the first protesters, largely upper-middle class generation y individuals, with brute force which drew more protesters (both general public and more extreme Leftists) to the streets. Opportunistic Leftists made up the majority of the street protesters on days two and three when violence and vandalism spiked. Politically fragmented and disparate groups have now united across the country to accuse the government of authoritarianism. In 12 days of protests in Turkey, four people have died, 5,000 protesters have been treated for injuries or the effects of tear gas, and 600 police officers have been injured.

The Risks

  • As a major energy importer, the country relies heavily on foreign investors and tourism to finance its trade deficit, and a sudden outflow of funds could threaten the economy.
  • Summer is traditionally the high season for tourism, and the ongoing instability could eat into tourist revenues, which account for 10.9 percent of Gross Domestic Product (GDP) and generate an estimated 2 million jobs.

Why This Is Not An ‘Arab Spring’

The AKP political party has won the last three elections and Prime Minister Erdogan remains popular with many Turks because of his economic record over the past ten years. The Turkish government continues to be supported by a large majority, and a formidable government competitor remains long off. These socio-economic and political factors distinguish the Turkish protests from recent uprisings in both the Middle East and Southern Europe.

  • Erdogan's government has been credited with pursuing prudent fiscal and monetary policies while promoting investments in infrastructure, education, health and technology.
  • The per capita gross national income and the gross domestic product have both tripled in the past ten years.
  • Foreign investment has dramatically increased, with the number of foreign companies with international capital expanding from 6,700 in 2003 to nearly 30,000 in 2011.
  • A.T. Kearney’s 2012 Foreign Direct Investment Confidence Index placed Turkey as the world’s 13th most attractive place to invest.

What is Next?

Local elections are next March, and presidential elections will be next summer. If the Prime Minister doesn’t resolve the situation, Turkey could see a leadership change. Importantly, any transition in leadership is likely to be democratic. Upcoming elections in 2014 will provide an opportunity for protesters to express themselves at the ballot box. The president of Turkey does have the ability to dismiss the cabinet, including the PM, and form a new government. This option is unlikely, and would result in political deadlock, economic uncertainty, and market volatility.


The MSCI AC World Index (ACWI) is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.

The MSCI Turkey Index is a free float-adjusted market capitalization index designed to measure broad-based equity market performance in Turkey. It seeks to measure the performance of the Turkish equity market. Components primarily include consumer staples, financial and industrials companies.

One cannot invest directly in an index.

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