Courtesy of Benzinga.
- Turker Hamzaoglu, a U.K.-based analyst for Bank of America, said that Turkey's election results will likely put an end to the country's political uncertainty.
- The ruling Justice and Development Party (AKP) party regained a majority government in Turkey's elections.
- Hamzaoglu boosted his rating on Turkish external debt to Market Weight from Underweight and reaffirmed his USD/TRY target of 2.80.
Turkey's ruling party, the Justice and Development Party (AKP), won a national election over the weekend.
The AKP party received 49.4 percent of the vote and regained the majority which it lost back in June. The party, led by President Recep Tayyip Erdogan, now holds 316 seats in the Turkish parliament.
The country's main opposition party, the Republican People's Party (CHP) received 25.4 percent of the vote while the Nationalist Movement Party (MHP), crossed the 10 percent threshold needed to claim seats.
The ETF that tracks the market performance of Turkish equities, Ishares Msci Turkey Inv Market Index Fd (NYSE: TUR) soared higher by nearly 10 percent Monday morning.
Turker Hamzaoglu, a U.K.-based analyst for Bank of America that covers Turkey, commented in a note that the "rather surprising" AKP win was a "surprise" but re-confirms his prior view that political risks in the country have likely peaked.
Hamzaoglu continued that the Turkish investment case has "been resolved in what we believe is a market friendly way" and a four-year term with an outright majority for the AKP party "can be seen as a positive from a policy continuity perspective." As such, the analyst upgraded his rating on Turkish external debt to Market Weight from Underweight while also reaffirming a USD/TRY target of 2.80.
Hamzaoglu noted that the election results benefits Turkish rates and equities, especially banks. However, he cautioned that "significant challenges remain" including the Kurdish problem, the need for a new constitution, eroding quality of institutions, and the need for a resumed reform zeal to improve democratic and individual rights.
Hamzaoglu also added that on the macro front, the normalisation of monetary policy and addressing the country's productivity problem also needs a new policy perspective. The analyst suggested that the government should adapt a "credible" road map to address these issues given the ongoing "tough global backdrop" seen across many emerging markets.
Bottom line, the analyst stated that Turkish assets "reflect the benefit of a post-election rally and take back some of the underperformance due to domestic politics" and that the fundamental story "will once again take the front seat."
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