Turkey Trouble... or Profit Opportunity?

One of Europe’s most intriguing emerging markets was rocked by turmoil this week amid election uncertainty. Turkey’s stock market was taken on a rollercoaster ride as a result of an impasse in the election of a new President.

The ruling AKP party’s preferred candidate – current Foreign Minister Abdullah Gul has a political past that appears just a bit too Islamic for Turkey’s secularists. Many in Turkey believe the country should be thinking and acting more European in hopes of gaining accession to the European Union. But Turkey – which straddles the gateway between Europe and the Middle East – has a population that’s overwhelmingly Islamic.

The modern Turkish state was formed decades ago with a secular constitution that clearly spells out separation between "mosque and state" as a key principle. As such, Turkey is seen in the west as the model of a modern, well-functioning democratic nation – a state that other nations in the region can emulate.

That image was called into question this week, when Turkey’s military rattled its saber regarding the aforementioned election. Many of Turkey’s secular citizens – in addition to the military – feared Mr. Gul as President might have hidden plans to influence the political direction of Turkey in a more religiously fundamental direction.

But the key point in this is that protests in Turkey, as well as quick action by opposition politicians in Parliament succeeded in bringing about a call for general elections by late July. Before this apparent political “crisis” elections were scheduled to take place before November in any event. So this simply moves up the political process by several months.

The point here is that Turkey’s constitutionally elected democratic system is working perfectly well – it’s functioning as it should – with free elections just around the corner.

Turkey is one of my favorite emerging markets in which to invest today. Its economy has expanded at an average growth rate of 7% over the past several years, spurred by robust profit growth and important free-market reforms put in place by the current government. Booming global trade and a wealth of global investment is helping transform Turkey into a dynamic, fast growing market. Last year, Turkey attracted a record $20 billion in foreign direct investment – that’s a great vote of confidence in the future of its economy.

The government’s smooth handling of this so-called “crisis” only reinforces my desire to invest in Turkey. Election Day is set for July 22 – it’s possible we could witness more volatility in Turkish stocks between now and then – but I would view this as a great buying opportunity.

Global investors apparently agree with this line of reasoning too. After falling about 7% Monday – Turkish stocks rebounded strongly both Wednesday and Thursday as Prime Minister Erdogan called for and the Parliament scheduled new elections. The Turkish lira – one of the strongest emerging market currencies – also gained against the dollar in foreign exchange trading.

Within every “crisis” – can also be found opportunity. And this may be a perfect opportunity for you to invest in Turkey for big potential long-term gains.