View source for Foreigners Suspend Disbelief Edge Back Into Turkish Markets

<br>By Nevzat Devranoglu, Rodrigo Campos and Jonathan Spicer<br> <br>ANKARA/NEW YORK, Jan 25 (Reuters) - Foreign investors who for years saw Turkey as a lost cause of economic mismanagement are edging back in, drawn by the promise of some of the biggest returns in emerging markets if President Tayyip Erdogan stays true to a pledge of reforms.<br> <br>More than $15 billion has streamed into Turkish assets since November when Erdogan - long sceptical of orthodox policymaking and quick to scapegoat outsiders - abruptly promised a new market-friendly era and installed a new central bank chief.<br> <br>Interviews with more than a dozen foreign money managers and  [https://www.wiklundkurucuk.com/Lawyer-Turkey-tn Lawyer Turkey] Turkish bankers say those inflows could double by mid-year, especially if larger investment funds take longer-term positions, following on the heels of fleet-footed hedge funds.<br> <br>"We're very encouraged to see a different approach coming in," said Polina Kurdyavko, London-based head of emerging markets (EMs) at BlueBay Asset Management, which manages $67 billion.<br> <br>"We have added to our exposure and we plan to keep it that way as long as we continue to see the orthodox steps."<br> <br>Turkey's asset valuations and real rates are among the most attractive globally.<br><br>It is also lifted by a wave of optimism over coronavirus vaccines and economic rebound that pushed EM inflows to their highest level since 2013 in the fourth quarter, according to the Institute of International Finance.<br> <br>But for Turkey, once a darling among EM investors, market scepticism runs deep.<br> <br>The lira has shed half its value since a currency crisis in mid-2018 set off a series of economic policies that shunned foreign investment, badly depleted the country's FX reserves and eroded the central bank's independence.<br> <br>The currency touched a record low in early November a day before Nagi Agbal took the bank's reins.<br><br>The question is whether he can keep his job and patiently battle against near 15% inflation despite Erdogan's repeated criticism of high rates.<br> <br>Agbal has already hiked interest rates to 17% from 10.25% and promised even tighter policy if needed.<br> <br>After all but abandoning Turkish assets in recent years, some foreign investors are giving the hawkish monetary stance and other recent regulatory tweaks the benefit of the doubt.<br> <br>Foreign bond ownership has rebounded in recent months above 5%, from 3. If you have any questions concerning where and  [http://fearlessguardians.cba.pl/index.php?action=profile;u=730012 Lawyer Turkey] how you can utilize [https://www.wiklundkurucuk.com/Lawyer-Turkey-pl Lawyer Turkey], you can contact us at the web site. 5%, though it is well off the 20% of four years ago and remains one of the smallest foreign footprints of any EM.<br> <br>ERDOGAN SCEPTICS<br> <br>Six Turkish bankers told Reuters they expect foreigners to hold 10% of the debt by mid-year on between $7 to 15 billion of inflows.<br><br>Deutsche Bank sees about $10 billion arriving.<br> <br>Some long-term investors "are cozying up to the idea of being long Turkey but it's a long process," said one banker, requesting anonymity.<br> <br>Paris-based Carmignac, which manages $45 billion in assets, may take the plunge after a year away.<br> <br>"There could be some value in Turkish assets and we have started to look with a little bit more interest especially with the very high rates," said Joseph Mouawad, emerging debt fund manager at the firm.<br> <br>"It is still a hairy market to invest in but for sure, relative to what has been happening in the last 18 months, things have dramatically shifted and ... that has a lot to do with the people running the economic policy," he said.<br> <br>Turkish stocks have rallied 33% to records since the shock November leadership overhaul that also saw Erdogan's son-in-law Berat Albayrak resign as finance minister.<br> <br>He oversaw a policy of lira interventions that cut the central bank's net FX reserves by two thirds in a year, leaving Turkey desperate for foreign funding and teeing up Erdogan's policy reversal.<br> <br>In another bullish signal, Agbal's monetary tightening has lifted Turkey's real rate from deep in negative territory to 2.4%, compared to an EM average of 0.5%.<br> <br>But a day after the central bank promised high rates for an "extended period," Erdogan told a forum on Friday he is "absolutely against" them.<br> <br>The president fired the last two bank chiefs over policy disagreement and often repeats the unorthodox view that high rates cause inflation.<br> <br>"Investors didn't expect the leopard to have changed his spots and he hasn't. I suspect people will be feeling Erdogan's influence by mid-2021" when rates will be cut too soon, said Charles Robertson, London-based global chief economist at Renaissance Capital.<br> <br>Turks are among the most sceptical of Erdogan's economic reform promises.<br><br>Stung by years of double-digit food inflation, eroded wealth and a boom-bust economy, they have bought up a record $235 billion in hard currencies.<br> <br>Many investors say only a reversal in this dollarisation will rehabilitate the reputation of Turkey, whose weight has dipped to below 1% in the popular MSCI EM index.<br> <br>"Turkey can't be a long-term investment for portfolio investors because they will expect the rinse-and-repeat process ... that we've seen so many times in the last 15 to 20 years," Renaissance's Robertson said.<br><br>($1 = 0.8219 euros)<br> <br>(Additional reporting by Karin Strohecker in London and Dominic Evans in Istanbul; Editing by William Maclean)<br>