Cyprus talks mean the worst may be over for Turkey

Turkey’s stock market has been in a downward spiral as Prime Minister Erdogan looks more and more like a dictator than an elected official. This has alerted me to a possible situation where the worst possible outcome is priced in to the market, and the downside is limited compared to the upside.

A possible catalyst for a rebound in the Turkish market may come on the back of reunification talks with Cyprus. Officials from Cyprus and Turkey would need to cooperate to build a natural gas pipeline to Europe, which would be a huge boon for the region. If reunification does occur, it would provide a boost in the form of increased natural gas exports.

Both countries have an incentive to find a solution. And Western countries have an incentive as well, because European countries need the gas, and United States energy companies are involved in its exploration. Because all parties have a stake in the matter, there is a good chance the deal could go through. If it does, I believe the Turkish stock market could rebound.

Thus I have begun a small speculation in TUR, the Ishares Msci Turkey Investible Market Index. If the deal actually goes through, I may increase the size of this position. However, I want to keep it small in the meantime on the possibility that the situation with Prime Minister Erdogan could further deteriorate.

One Response to Cyprus talks mean the worst may be over for Turkey

  1. Great post- I think Turkey is an interesting story right now and personally think TUR will be a good longer-term investment. I have a little myself. In the short and mid-term, however, they need to work through their political instability and have peaceful elections as well as address free fall of the Lira, which their recent rate hikes may achieve.

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