26th March 2013
Turkey is being cited as a glowing exception to the world’s economic woes by Invesco Perpetual. Of course investors always have to be a little wary of fund managers talking up their own investments too much. But Liesbeth Rubinstein, emerging market equities fund manager at Invesco Perpetual has some very positive things to say about Turkey ranging from the profitability of Ford’s operations there to recent pension reforms. Mindful Money thinks her views are well worth a read.
Rubenstein says Turkey is targeting a place in the world’s top 10 economies by 2023 and has adopted tough financial and fiscal reforms, successfully recapitalising its banks and reducing the rate of inflation since the 2001 financial crisis.
She writes: “Along with a continuing privatisation programme, which saw the successful US$3.46bn sale of four more of the country’s regional power distribution companies in March, Turkey, in our opinion, exhibits many of the long term fundamentals for continued growth. Consumption makes up 70 per cent of output in the economy, which grew by 8.5 per cent in 2011 and is forecast to expand by 4 per cent in 2013. The 75 million population is relatively young – 42 per cent are under the age of 25 – and getting richer. The country continues to attract investment from Western companies looking to benefit from this growing middle class – PepsiCo continues to register double-digit sales growth, while Tesco is preparing to open another 70 stores.”
She points out that Turkey is now a car manufacturing hub and a highly profitable one at that.
“Profit before tax at Ford in Turkey is higher than Ford’s entire profitability in Western Europe. Recent figures demonstrate that this productivity is indicative of the entire sector. February’s Purchase Manager’s Index revealed an increase in output, with new orders rising to the extent that manufacturers are struggling to cope with demand. New business from abroad in February increased at the fastest pace since January 2012 and, as has been the case for every month since June 2009, employment levels in Turkey’s manufacturing sector rose during February.”
She adds that recent pension reforms should also strengthen capital markets. “Since the start of the year, the Turkish state has been making limited contributions to private pension schemes, leading to a sharp increase in the number of people participating. Almost 120,000 people joined private pension schemes in January alone, a four-fold increase from a year earlier. Anecdotally, during a recent visit to Turkey, people I spoke to were very excited about the development of a private system for the state provision of pensions. Unlike the UK, people in Turkey are very keen to set up their own pension scheme and contribute to it themselves, with some incentives from the Government. This is really supportive for the market in general – the introduction of a private pension system is expected to contribute around 1.5 per cent of GDP this year and expected to reach 10% of GDP within the next 10 years.”
She adds that the Invesco Perpetual Emerging European Fund has trimmed some holdings recently due to good performance but adds that stocks are still attractively valued on a price earnings basis and pay a high dividend yield.