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Turkey’s economy is set for strong growth 1 mai 2013

Posted by Acturca in Economy / Economie, Turkey / Turquie.
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Investment Executive (Canada) Wednesday, May 1, 2013, p. 19                         Türkçe

Catherine Harris

There are many sectors worth exploring in this emerging market, including banking, aviation and consumer durables.

Turkey has reached the sweet spot for emerging countries: incomes are high enough to spur strong growth in consumer spending and, thus, lots of good investment opportunities. In particular, analysts like banks and consumer durables, which will benefit as incomes continue to rise.

Turkey was little affected by the global financial crisis, thanks to good monetary and fiscal policy for the past decade. Economic growth rebounded to 9.2% in 2010, followed by 8.5% in 2011. Turkey’s central bank had to move quickly to prevent high inflation, historically an issue in the country, from taking off. With growth slowing to 3% last year, monetary policy has been eased; sustainable 4.5% growth is expected in 2013.

The country’s pluses include a young population (the median age is 29); low household, corporate and government debt; and a solid banking system.

New York-based Fitch Ratings Ltd. raised Turkey’s credit rating to investment-grade in late 2012. Although that has improved external financing for the country, says Philippe Langham, senior portfolio manager and head of emerging-markets equities with RBC Global Asset Management Inc. in London, « the really big impact » will come when one of the the two major New York-based credit agencies – Moody’s Investors Service Inc. and Standard & Poor’s Financial Services LLC (S&P) give Turkey the same investment-grade status. Both currently have Turkey rated just one notch lower, but Moody’s says it will consider raising it if Turkey’s current account deficit is lowered and bank reserves are raised.

Turkey’s current account deficit, around 7% of gross domestic product, is the economy’s major vulnerability, Langham says.

A major factor is the country’s dependence on imported energy. « A US$10 increase in the price of [a barrel of] oil adds US$5 billion to Turkey’s import bill, » says Ercan Guner, head of equities and structural funds with HSBC Global Asset Management (Turkey) Ltd. in Istanbul.

Another major problem, says Langham, is poor infrastructure, which limits production and consumption of locally manufactured goods. There now is increased infrastructure investment, he adds, which should help to make the economy more productive.

Turkey’s geographical proximity to the volatile Middle East and North Africa (MENA) region is a vulnerability should war or social unrest erupt. However, Turkey’s location also has advantages. The country’s exports to the MENA region are aided by the shared Muslim religion and have been very strong in recent years, offsetting weak demand in Europe.

Turkey’s geographical location also makes it a natural hub for travellers, which is why several investment fund managers, including Guner and Matthew Strauss, vice president and portfolio manager with CI Investments Inc.’s Signature Global Advisors division in Toronto, both favour Turkey’s aviation sector.

Here’s a closer look at some Turkey-based companies offering American or global depositary receipts preferred by analysts:

  • Arçelik AS. This company has a 50% share in the domestic appliance market and accounts for 60% of Turkey’s appliance exports. Arcelik has manufacturing plants in Romania, Russia, South Africa and China, as well as Turkey. Guner, whose funds hold shares in the firm, expects earnings per share to increase by 11% this year due to better cost management and strong sales growth.
  • Asya Bank. Given this bank’s focus on small to mid-size businesses, its high non-performing loans should decline as economic growth picks up. Guner expects average earnings growth of 29% this year and next, which should push up the low stock price.

Analysts at J.P. Morgan Securities LLC in New York agree and have an « overweight » rating on the stock.

  • Bim Birlesik Magalazer AS operates the largest discount food and consumer stores in Turkey and has growing operations in Egypt and Morocco.
  • Charles Burbeck, co-head of global equity portfolios with UBS Global Asset Management (U.K.) Ltd. in London, says BIM has been « fantastically » successful with its simple, innovative format that resonates with the value-conscious consumer. The business is very scalable, and BIM is very aggressive in keeping prices low.
  • Burbeck expects BIM’s strong growth to continue, both in Turkey and with further expansion into Muslim countries, in which it is unlikely to face competition from global retailers such as Wal-Mart Stores Inc. and Costco Corp. France-based Carrefour SA also has a presence in that part of the world but Burbeck doesn’t see that firm expanding aggressively, given the sluggish economic growth in France.
  • Garanti Bank is favoured by Burbeck, Langham, Strauss and Geraldo Zamorano, director of investments at Brandes Investment Partners & Co. in San Diego.

Strauss likes Garanti’s focus on retail banking, given the huge potential for increased consumer loans, including mortgages. He also is impressed with the bank’s utilization of technology, including mobile banking and automatic teller machines (ATMs), which, he notes, can do 170 types of transactions.

« Garanti’s focus on, and use of, technology, » Strauss says, « gives us confidence that it will gain – or, at least, maintain – its current market share. »

  • TAV Havalimanlari Holding as owns and operates the Istanbul airport, which, Strauss says, makes TAV a good play on air traffic without the volatility inherent in airline companies’ stocks. He notes that Turkey’s government wants a second international airport built to facilitate traffic to the MENA region, which could hamper TAV’s growth prospects. But that won’t happen until 2017-20, and TAV could win that contract.
  • Turkcell Iletisim Hizmetleri AS. Prospects for this mobile cellphone company, which provides service in Turkey and nine other countries, are excellent, given expected increases in both market penetration and data usage.

Strauss notes that Turkcell’s share price has been depressed by a dispute over ownership of the shares held by its controlling shareholder; once that’s resolved, the share price should rise.


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