Charlemagne's Gems: how much delight is left in Turkey?

Turkey also has a strong banking system. 

The largest part of the stock market, banks had no subprime exposure and no investments in peripheral eurozone paper.  

Tier One ratios are over 14%, amongst the highest in the world. As well as low personal borrowing, government debt to GDP is only 40%, against a Eurozone average of around 90%. 

The ‘look east’ policy means that its dependence on western demand is falling.  In 2000, 70% of exports were to developed economies: ten years later, the figure had fallen to 50%. 

Despite the strong rise in share prices last year, the market remains attractively valued, with a PE ratio of just over 10 times this year’s earnings, supported by double-digit earnings growth and high dividend yields.

Key picks

Our favourite investments mirror these themes.

We like TAV, the airport operator, whose revenues have grown from €402 million in 2006 to €1,099 million last year. 

We also invest in Arcelik, which has a 50%-plus market share in white goods in Turkey and a 17% share in the UK, under the Beko brand, whose long term plan is to double sales in the next five years. 

Another attractive investment is Tofas, which makes Fiat cars. Istanbul’s streets may already seem overcrowded, but Turkey has a mere 138 cars per 1,000 people, compared to 360 in neighbouring, and poorer Bulgaria. 

The long-term prospects are bright, even if it may continue to be a bumpy ride.