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Turkish Failed Coup and Investment Environment

The failed coup was over before it really started.  It looked like a desperate attempt to overthrow the current AKP government.

Unlike coups of the past in Turkey, this one did not have the support of the electorate.  Firstly, about 50% of the Turkish population supports the AKP party.  And most of the remaining voters do not want to see a return to military rule.  This would have been negative overall for Turkey.

I will not go into a detailed discussion on the politics here since it is currently a very fluid situation and I believe our readership would benefit from our views on any investment opportunities for the moment.

Short-term, there are some opportunities.  The currency has already rebounded but the stock market was still down as of Monday morning.  If you want to take a position, the broad market ETF – TUR, is probably the best bet.

Please note that risks still remain in that the tourism sector was down recently due to the terrorist attacks and Turkey is at risk of a US interest rate rise probably sometime after the November elections in the US.

Thus I would say a short to medium term trade in TUR for up to 3 months might yield positive return.  Maybe somewhere around 5 to 10% gain.  On our portfolio, we are not investing since the options for the ETF are not liquid enough and we think the gain is barely sufficient for the risk taken here.

A lot depends on the reaction of the current government against the coup plotters and the upholding of the legal process.  This is critical for investor confidence.


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