What we observed:

My trip to Istanbul revealed two prominent features of the Turkish economy: the pragmatism of Turkish industry, and that the macro-economy is poised, somewhat precariously, between growth and contraction. The domestic economy presents ample opportunities for growth; meanwhile, Turkish businesses consistently exhibit the skill and flexibility necessary to exploit formative markets in surrounding countries. I have confidence that with some time and some luck, Turkey could emerge as the lead economy within the region. At the same time, Turkey’s prospects are hampered by Europe’s woes and the country’s own internal financial imbalances.
I had the opportunity to attend a policy briefing by the Turkish central bank. The bank’s “unorthodox” monetary policy (i.e. suppressing interest rates and at the same time rationing domestic liquidity) has been the subject of doubt abroad. Yet my own impression was that the bank has, very pragmatically, designed a set of policies well suited to Turkey’s needs – even if those policies transgress “textbook procedure.” Still, the bank is walking a fine line; it needs agility and luck if it is to steer Turkey through what is a tricky economic landscape.
Perhaps the most exciting thing I witnessed is that Turkey is moving in a concerted manner to liberalize key infrastructure sectors, and it is investing to overcome key structural deficits in the economy (e.g., domestic power generation and distribution). Given such efforts – and assuming that the associated policy framework does not evaporate overnight – I think valuations on selected stocks are attractive, in spite of prevailing risks.

Andrew Foster

A massive new mixed-use complex under construction in Levant, one of Istanbul's commercial districts

Residential construction overlooking a hillside in Levant

Commerce in the Grand Bazaar - for tourists and locals alike

Hagia Sophia - holy wisdom, still standing tall after 1,500 years

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.

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Field Notes: Istanbul, May 2012

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