The upcoming parliamentary elections on Sunday in Turkey could force Erdogan to postpone his plan for a new constitution and could lead to new political leaders in the Ministry of Finance and the Ministry of Economics. This would trigger an increase in uncertainty and consequently a higher degree of volatility for the Turkish Lira and the Istanbul stock Exchange.
Four main political parties are running for government: the ruling AKP (Justice and Development), the main opposition party CHP (Republican People’s Party), MHP (the Nationalist Action Party) and the Kurdish HDP (Kurdish People Democratic Party).
Erdogan wants to strengthen his influence
Two major uncertainties affect the elections this year: firstly, whether HDP, the Kurdish Party, will be able to exceed the 10% threshold to make it into parliament and, secondly whether AKP will be able to acquire enough seats (276) to form a single party government.
Depending on the outcome, AKP may be willing to shift to a presidential system. If Erdogan manages to hold on to power in a single party government, this might lead to an amendment of the constitution, which would furnish him with more authority.
A coalition government would lead to higher uncertainty
A possible coalition government could cause more political turmoil after the election period. The capital market may be concerned with the question of who is going to replace Ali Babacan, the Deputy Prime Minister responsible for Economics, and Mehmet Simsek as the Minister of Finance. It seems that continued political stability and, hence a further improvement of consumer sentiment would ease the pressure on the Turkish lira and in turn have a positive impact on the economy.
This year economic growth will be at 3%, down from 4.5% in 2014. Turkey is feeling the weakness of its major trading partners such as Russia and the Middle East. The equity market has been moving sideways this year, with the Turkish lira depreciating sharply against many other emerging markets currencies. Therefore the economy failed to benefit from the cheaper oil imports.
Recent polls indicate that HDP’s popularity hovers around 10% and AKP’s votes to fluctuate around 40-43%. Given this outcome, AKP would fall short of 330 seats needed to call a referendum on amending the constitution.
This document is an advertisement. All data is sourced from ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. unless indicated otherwise. Our languages of communication are German and English.
The prospectus for UCITS (including any amendments) is published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the InvFG 2011 in the currently amended version. The simplified prospectus is prepared by ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. and published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the ImmoInvFG 2003 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and for ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. pursuant to the provisions of the AIFMG in connection with the InvFG 2011.
The fund prospectus, Information for Investors pursuant to § 21 AIFMG, the simplified prospectus, and the key investor document/KID can be viewed in their latest versions at the web site www.erste-am.com or www.ersteimmobilien.at or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus or simplified prospectus, the languages in which the key investor document/KID is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com or www.ersteimmobilien.at.
This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.