Foreign interests leave Turkey despite loss risks
Posted by meb at March 28th, 2008
The adverse effects of the closure case against the ruling Justice and Development Party (AK Party) are becoming more visible as time goes by. As Turkey’s markets lost over $20 billion on Monday in reaction to the case and as ongoing global turbulence got more serious, foreign investors started rapidly vacating the markets by selling their YTL-based holdings. Pointing out that since then the daily capital outflow has exceeded $100 million, which corresponds to a threefold rise, analysts say there will be a much worse storm if the Constitutional Court rules for the closure of the AK Party. They estimate that the dollar will sharply jump to YTL 1.35 from its levels below YTL 1.2 if the court accepts the case and starts proceedings on it.
Savaş Uzunyol, the general manager of Merkez Securities, believes the dollar’s value against the YTL will soar to YTL 2 if the party is closed. He says foreign investors would have left the markets in even greater numbers if they had found enough buyers in the market, but there is scarcity of buyer in the bourse these days. But if the government is thrown out of office by this case, foreigners will simply escape Turkey by accepting their losses, selling their stocks at any cost.
Uzunyol notes that Turkey’s image will receive a hard blow in the eyes of global investors if the party is closed and that it will not improve easily in the short and middle terms. “If a political party that won almost half of the vote is closed, the foreign investors will believe that democracy is worn out.”
Uzunyol also pointed out that the dollar has been on the rise against the YTL despite the fact that it has been falling against almost all other currencies in the last month. Tera Securities Marketing Director Ersagun Şimşek also points to the speed with which foreign investors have been abandoning Turkish markets. “They will leave as soon as they find a suitable opportunity,” he said. He added that foreign investors cannot understand the closure case against the AK Party: “They can understand the headscarf issue. They compare the Ergenekon operation to Italy’s Clean Hands operation and perceive them as steps on the way to strengthening democracy.” However, he stressed, there is no way to explain this case to a foreigner who was brought up in Europe’s democratic environment. Şimşek said foreign investment funds had begun to change their positions from purchasing Turkish assets to waiting for the right time to leave.
source: Today’s Zaman
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