Turkey is a strategically located country as an energy corridor with a close proximity to 72% of the World’s proven gas and oil reserves. It has an economy larger than many European countries including Poland, Netharlands, Belgium, Switzerland, Sweden, Austria and Norway. Turkey has favourable demographics with more than half of it is 78m poplation being under the age of 31. Over the past 30 years, the country showed an average economic growth rate of around 4% per annum.
Turkey has one of the lowest budget deficit and debt stock to GDP ratio in Europe, well below the Maastricht criteria. Its financial system is strongly regulated with solid banks having low leverage, strong capital adequacy ratio, high return on equity and double-digit growth prospects. Its economy is much less leveraged than Europe. While the households liability to GDP is around 1/3rd of Europe, its mortgage loans to GDP is less than 20% of that of Europe despite rapid growth over the past 5 years.
Total investments in the Turkish private pension system (just born in 2003) is around US$15bn with 6m savers vs. 26m civil employment, constituting roughly 2% of GDP, almost the lowest among the OECD countries where the average rate is around 86%. Turkey has invested around 15% of its pension fund assets in Equities, one of the lowest in the World. Turkey has a chronic current account deficit (driven by structural problems and its high energy dependancy) which makes Turkish Lira vulnerable to foreign capital inflows, among many problems (political uncertainty, lack of serious reforms, middle income trap, low savings, etc) which might exist in any other emerging market. The faster the economy grows, the larger the current account deficit. The result is boom and bust cyle every few years both in the economy and the stock market, providing attractive buying opportunity for quality businesses.