Templeton Asset Management's Mark Mobius has praised the recent performance of the Turkish economy and said it is clear of political risks.
Investors' generally preferred way to profit from a market is to denigrate a country's economic reputation and to then get shares of this country's markets at low rates, he said, adding that there is no way to decry the Turkish economy at present since it has already proven its resilience. The famous investor said his company considers Turkey a top-level emerging market and is set to add an amount near $250 -300 million to its already existing $1 billion of investment in the capital markets of the rapidly-growing country.
Speaking on Wednesday at a meeting in İstanbul that was organized by Turkey’s Akbank, Mobius said there is a predisposition towards more liberalization in Turkey and that the government is trying to open this path and ease restrictions on markets. Political tensions and troubled periods happen in all countries, but these don’t necessarily prevent markets from rising, he argued, and cited Thailand as a case in point. Thailand was subjected to a series of subversive domestic incidents and became a stage of mass killing, but its stocks nonetheless continued to rise, Mobius said, drawing from this example an inference that companies perform badly only when they are administered incorrectly.
Current indicators show that Turkish markets will display very strong performance next year. Mobius further asserted that there was a difference between what happened in Europe and in Turkey. Turkey decisively continued on a path of success over the course of the last couple of years, with an especially spectacular performance on the part of its banks. However, the profitability of Turkish banks will not be as high as it was in the last year, Mobius noted, but added that they will still be in much better shape than banks in Europe.
“If you look at the range of valuations, you’ll see Turkey is more or less in between the high and low range. … We are seeing a big improvement in earnings this year and next and that is really what the market is telling us with these higher prices,” he said in an interview with Reuters after the conference. A somewhat overvalued Turkish lira and a big increase in emerging market initial public offerings (IPO) made it difficult to predict how much longer the rally would last, he said. “But I think the flow of money is great enough to be able to overcome these issues,” he said.
Mobius has investments in Turkey’s two largest banks by market value, Akbank and Garanti, and refiner Tüpraş.
In response to a question on whether Turkey is doing the right thing in committing itself tightly to the floating exchange rate regime, Mobius said this policy preference is not completely void of risks. “One of the dangers is the menace of derivatives, which is everywhere in the world. There will be people that will attempt to exploit these derivatives against the domestic currency of the country. The total volume of the derivatives in the world is nearly $600 trillion, which is far greater than even the sums of all of the gross domestic products of these countries. This indicates that harsh fluctuations may happen and so everyone has to be very careful about currency controls,” he said.
Mobius also emphasized that these people enjoy currency controls and earn a lot merely through speculation. Therefore, he reasoned, it would be quite dangerous to try to control the currency unit in an open economy. “Is having a strong currency something bad?” Mobius asked rhetorically. “No, it is not. In the end, people will purchase your goods if you increase your productivity and the quality of your goods. Why is Germany a big exporter? Why do the Chinese have a high demand for BMW or Mercedes? Because they have quality. Thus, a country should not try to have the least-valued currency through controls.”