Weekly Tracker: October 25-31

TURKEY - Report 25 Oct 2015 by Murat Ucer and Atilla Yesilada

This week’s Tracker is solely dedicated to election results and coalition scenarios. October polls assign very little odds to an outright AKP victory, but the party might produce 270-275 seats, sufficient to be tempted into a third election.

In case of a hung-parliament, AKP-CHP is the most likely and favorable scenario. A more coherent Syria and ISIS policy, peace with PKK and a strong economy team that will clear the minefields narrowing the CBRT’s room for maneuver, as well as initiating structural reforms are some of the benefits of the coalition. Erdogan could still cause a lot of mischief, but under an AKP-CHP coalition, the party and the bureaucracy would probably gravitate away from him. The coalition would probably have a shelf life of two years, but that is good enough to spin a “new Turkey investment story”.

Then again, not everyone is convinced that this is the most likely scenario. Our economics author for one, shares his view and reservations as to why forming an AKP-CHP coalition could be a lot more difficult than many assume.

Cosmo says “don’t worry, be happy”. The markets have discounted most of the global and election-related positives, meaning that pain trade might have already started. But, in case of a hung-parliament with AKP below 265 seats, hold on to your positions and wait for the Happy Ending, if you are already subscribed to the “Turkey as a new investment story” view. Because in this scenario, Cosmo argues, with emerging markets being a ghost land for convincing stories, Turkey may excel in 2016 with her modest one.

Now read on...

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