24th November 2010
Nick Timberlake, head of emerging market equities at HSBC Global Asset Management, says Turkish equities look more expensive than the broader EMEA universe – at 9.5x – but the higher growth estimates justifies Turkey's premium.
"With a 2011 price earnings ratio of 10.7x, Turkish equities still remain inexpensive, compared to the broader emerging markets universe (of 11.6x). Our emerging market portfolios have held an overweight position in Turkey for the past two years and have benefited from strong performance, however we still think there is value."
Ercan Güner, a fund manager with HSBC Global Asset Management, based in Turkey says that Turkey is still "a high beta proxy for global growth".
"Turkey features a solid banking sector which is well capitalised and still highly profitable. Interest rates meanwhile are at historic lows – in the single digits for the first time.
"Pent up domestic demand, low inventory levels, and a low level of financial penetration set the stage for further growth," he explains.
On the back of recent upgrades by rating agencies, following a decade of structural reforms which has helped Turkey to pass the test of the global financial and economic crisis, the emerging markets team at HSBC expects Turkey to achieve investment grade status following the mid-2011 elections.
Timberlake adds: "We expect there will be further positive returns – though at a slower pace and the Turkish Lira will maintain its strength against a basket of the Euro and US dollar."
In terms of investment themes, Güner said industrial sectors were favoured to tap the recovery in manufacturing, with automotive, steel, fertiliser, energy, construction and aviation hotly anticipated to see most growth.