Turkey Investors to Spend Weekend Watching Trump and Erdogan
Turkey Investors to Spend Weekend Watching Trump and Erdogan
(Bloomberg) -- The most popular activity among Turkish investors this weekend could be interpreting the signs when President Recep Tayyip Erdogan runs into Donald Trump at the G-20 summit.
Investor interest in the leaders’ expected meeting is running high because of the strain Turkey’s proposed purchase of a Russian missile defense system has placed on relations with the U.S. It’s a choice that may be punished by sanctions from the Trump administration.
The discussions have “great importance for Turkish markets,” given investor concerns about the increased tensions between the NATO allies, Toygun Onaran, head of equity research at Oyak Securities in Istanbul, said by email.
Anxiety among investors over the delivery of Russia’s S-400 missile system, set for early July, have contributed to the weak performance of Turkish assets this year. The lira has declined 8.4% against the dollar, the worst emerging-markets currency after Argentina’s peso. The benchmark Borsa Istanbul 100 Index has lagged 4% behind the MSCI Emerging Markets Index, as discounts on Turkish stocks fail to entice buyers.
Despite recent stock inflows, foreign investors have been net sellers of $1.6 billion in Turkish equities and bonds this year, the largest outflows since 2015. Istanbul’s benchmark stock index gained 0.2% as of 11:35 a.m.
Erdogan has played down the threat of U.S. sanctions, saying he has “never got such an impression” from Trump. “Some low-level people are voicing such things,” he said late Wednesday before flying to Japan for the Group of 20 talks, where he is also expected to meet Russian President Vladimir Putin. He could be wrong, though.
Erdogan Says He Never Got Sense From Trump of Looming Sanctions
Earlier in June, the Trump administration was said to be weighing three sanctions options to punish Turkey for the missiles deal, with the most popular one targeting several companies in its defense sector under the Countering America’s Adversaries Through Sanctions Act, or CAATSA, Bloomberg reported June 19. Any such response would be in addition to a U.S. undertaking to end sales of its F-35 fighter jets to Ankara.
Because the S-400 system is seen as incompatible with the F-35 program, Turkey won’t be allowed to have both sets of military hardware. The U.S. has concerns the Russian system may be used to gather intelligence on the F35s’ stealth capacity and the Trump administration has repeatedly warned that it will stop providing them to Turkey if it goes through with the purchase.
“Although CAATSA targets the person and entity engaging with the intelligence or defense sectors of Russia, and within that context mainly the defense companies engaging with the Presidency of Defense Industries, it will probably have a negative impact on the overall market sentiment,” Onaran said.
Erdogan and lawmakers from his government have repeatedly said the S-400 purchase is a done deal. The Turkish leader said in an interview with Nikkei on Wednesday, that he is hopeful that meeting Trump will be important in eliminating a deadlock in relations and strengthening cooperation with the U.S.
To contact the reporter on this story: Tugce Ozsoy in Istanbul at tozsoy1@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Jon Menon
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