Turkey underperformance could continue – TDS

By FXStreet FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that despite the November elections, we believe that the political situation in Turkey remains very unsettled.

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Furthermore, the underlying economic fundamentals remain weak, and so we believe that underperformance in Turkish assets is likely to continue in 2016.

POLITICAL OUTLOOK

Erdogan and his AKP won an unexpected victory in November elections. The end of lingering political uncertainty since the inconclusive June elections has been welcomed by markets, but we think a continuation of the increasingly autocratic rule of Erdogan is not necessarily a positive development. The next elections are not due until 2019.

Terrorist activity stemming from ISIS and the civil war in neighboring Syria will severely test Erdogan’s foreign policy. Furthermore, the domestic situation with the Kurdish PKK remains unsettled.

Relations with Russia remain tense, with Putin enacting economic sanctions after the downing of the Russian jet last month. Among other things, Russia has restricted imports of Turkish goods and suspended visa-free travel. Russia is Turkey’s second largest trading partner, behind only Germany. Russia is the number one source of Turkish imports, but is only the seventh largest destination for Turkish exports.

ECONOMIC OUTLOOK

The economy …read more

Source:: FX Street