Sam Vecht, a fund manager at BlackRock, has increased his exposure to Turkish financials despite widespread anxiety about the country’s future.
On Tuesday the Turkish central bank kept its benchmark interest rate at 7.75% despite the rapidly depreciating currency andimmediately after the announcement the lira fell by 1.4% to a record low, having already fallen by 25% against the pound over the past year.
Vecht acknowledged too that Turkey was suffering from domestic political issues, with more than 60 senior industry and government figures – including the chief executives of state-owned financial institutions – having been detained by police on corruption-related charges.
Through his £730 million BlackRock Emerging Europe fund and £114 million investment trust of the same name, Vecht has historically avoided Turkey due to concerns about inflation and a high current account deficit.
However, with the Turkish banking index having plunged 50% from peak to trough during 2013, Vecht argued that ‘much of the bad news is already reflected in equity prices’.
The manager continued: ‘We do not believe that the problems in Turkey have been solved in their entirety, but valuations now more than reflect the risks and we have significantly increased our exposure to Turkish financials.’
In particular, Vecht has bought Halk Bank and Garanti Bank. ‘The correction in the Turkish markets means that these stocks trade at the lower end of their historical ranges and represent a rare opportunity to buy stable banks with strong franchises on depressed book values,’ he explained.
Vecht added: ‘In our view, although recent events will have some short-term impact, we believe that Turkey’s long-term future is bright as it emerges as a regional power-broker and economic hub.’