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UBS: Why we are still overweight Turkey?

UBS analysts explained why Turkish assets' outlook is still on the positive side

UBS: Why we are still overweight Turkey?
05 10 2016, 16:04

Switzerland based UBS bank, stated that they stay overweight Turkey within EM, mainly on valuation and relative performance in a report released on tuesday.

According to the report, Turkey was a major beneficiary of the benign global market conditions until late-April, but has underperformed badly since then mainly due to domestic nonmarket events.

UBS analysts said that global market conditions' remaining fairly benign longer-term should limit currency downside to TRY 3.10 at end-2016 and TRY 3.30 at end-2017.

UBS listed three reasons for overweighting Turkey

1. One key to market performance in Turkey long-term was always going to be the impact, if any, of recent political events on the domestic economy; GDP growth in Turkey has remained one of the highest in EM outside Asia.

2. After falling sharply around the end of last year, earnings momentum in Turkey is edging higher although Turkey's Upgrades/Downgrades remain in negative territory. Overall, however, helped by the weaker dollar, the trend in Turkish corporate earnings is now positive.

3. Turkish valuations look very cheap relative to MSCI GEMs

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