Foreigners edge back into Turkish markets

Foreign investors who remained aloof from Turkey for a few years are edging back in, drawn by a promise of some of the biggest returns in emerging markets and a pledge of economic and legal reforms, according to money managers.

"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.

"We have added to our exposure and we plan to keep it that way as long as we continue to see the orthodox steps," she told Reuters.

More than $15 billion has streamed into Turkish assets since November 2020, when President Recep Tayyip Erdoğan promised a new market-friendly era and overhauled the economy management team with new appointments to the helms of the Central Bank and the Treasury and Finance Ministry.

Interviews with more than a dozen foreign money managers and Turkish bankers said those inflows could double by mid-year, especially if larger investment funds take longer-term positions. Six Turkish bankers told Reuters they expect foreigners to hold 10 percent of the debt by mid-year on between $7 to 15 billion of inflows. Deutsche Bank sees about $10 billion arriving.

Turkey's asset valuations and interest rates are among the most attractive globally. 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.

Newly appointed Central Bank governor Naci Ağbal has hiked interest rates from 10.25 percent to 17 percent and promised even tighter policy if needed. Swift monetary tightening has lifted Turkey's real rate from deep in negative territory to 2...

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