Another Way To Play The War Scenario
Although most financial markets are already pricing in a war
with Iraq, many
will still encounter further panic-induced downside once the first shot is
fired. However, once the smoke clears (literally and figuratively), there could
be some good buying opportunities. One such opportunity lies in Turkey. Close
end exchange traded funds, such as Morgan Stanley’s Turkish Investment Fund
(TKF), offer US investors the opportunity to invest in foreign country stock
indices. TKF is currently trading at a 4.22% discount to net asset value.
Reasoning…..
Due to Turkey’s proximity to Iraq, its financial markets will experience some
decent panic selling once a war begins. However, a combination of geopolitical
and fundamental circumstances could make long-Turkey a good bet.
Politics (The Free put Option)
Turkey has become an indispensable partner for the West in several regards.
- As the West seeks to combat certain radical Islamic terrorist threats, it
will increase its reliance on Turkey as its link to the Muslim world. Turkey,
unlike most Muslim countries, has a secular government that champions
democracy. - In an effort to eliminate popular, social discontent over authoritarian
rule in the East, the West will use Turkey as a successful example of
Islamic-styled democracy. And as a result, Turkey will not be allowed to fall
into the throws economic turmoil that creates conditions ripe for breeding
radical Islamic terrorist organizations. - Turkey will be a pivotal player in the invasion of Iraq; the US is
planning to use its bases in Turkey as launching pads for an attack. - Turkey will play an important role in the nation building phase in Iraq.
- Turkey is the only Muslim member of NATO and is also being considered for
membership to the European Union. Europe will not want a nation filled with
radical, anti-western citizens next door.
Most importantly, Turkey’s importance to the West is no more evident than in the
size of the financial assistance package–currently estimated at about $10
billion–being considered by the international community.
Economics
- Turkey’s economic down-cycle has bottomed and is expected to grow by 3 to
4% this year, despite a war with a Iraq–The Govt. is predicting 5% growth. - Included in the GDP forecast numbers above, Turkey is expected to meet its
inflation target of 20%. - The Turkish government has been adhering to the guidelines prescribed by
the International Monetary Fund.