Erste Asset Management

Turkish Elections Update

Turkish Elections Update
Turkish Elections Update
Share post:

With the current outcome, the uncertainties in Turkish economies are off the table. AKP (governing party Justice and Development) will now have 316 seats in the parliament. This is enough to form a single party government, still, it falls short of constitutional majority – the most market friendly outcome. There will be a positive sentiment as Turkey goes back to business. After a period of deepened political uncertainties, the election outcome leads to some relief on Turkish capital markets.

AKP secures parliamentary majority

After having ruled the country for 13 years, AKP won another election on 1 November 2015 by 49% of total valid votes. This indicates that there will be a single party government in Turkey.

The high election board will release the official results in 10 days. The unofficial results indicate that AKP’s total votes exceeded the combined vote of the other three parties represented in Parliament:

· AKP received 49.4% of the votes vs. 40.9% in June – with 316 seats in the parliament
· CHP received 25.4% of the votes vs. 24.9% in June – with 134 seats in the parliament
· MHP received 11.9% of the votes vs. 16.3% in June – with 41 seats in the parliament, and
· HDP received 10.7% of the votes vs. 13.2% in June with 59 seats in the parliament.

Positive shock for the market, now back to business

The next issue will be the formation of the government, especially the cabinet and the ministry of economy. It is likely that the form of government will be announced before we enter 2016, and the reponsibles for economics and finance might be even announced by December this year. As Turkey goes back to business, the most important factor will be the next economic program. The structural reforms and their implementation process will also determine the pace of economic growth. Regarding the presidential system further negotiations and discussions between President Erdogan and Prime Minister Davutoglu are expected over the coming months.

Better macro outlook, attractive valuations

The absence of political uncertainties will put a relief on the currency. Turkish Lira will strengthen over the US Dollar, which fell to 2.92 levels after the initial announcement. This in turn would also ease the pressure on the Central Bank of Turkey that was expected to hike the interest rates due to weak currency for a while. For the equity market, the single party government was not priced in and should therefore be perceived positively by the investor community. Turkish equity market now trades at a price-to-earnings-ratio of 9 based on the earnings expectations for 2016. This ratio represents a 12% discount (based on historical averages) relative to global emerging market equity markets (Source: MSCI, Bloomberg).

 

RESPOND TO THE ARTICLE

Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to § 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the web site www.erste-am.com within the section mandatory publications 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, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to § 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

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.