Video Viewpoint

Seasoned investment professionals, sector-dedicated analysts, and creative thinkers are at the heart of our business. Get their perspective on today's market climate.

All Videos

Video Transcript

  

             

  

Turkey


ERIC FINE: Turkey has certainly been in the headlines generating news but it has also been a poor performer and we don't have any allocation to it. What did you learn in Turkey?


NATALIA GURUSHINA: The macroeconomic fundamentals in Turkey are getting worse. The first thing to mention is our beloved twin deficits, a combination of fiscal balance and current account balance. Unfortunately for Turkey, twin deficits will probably be amongst the largest in the emerging markets, close to 9% this year.  When net FDI (foreign direct investment) covers only 2% of GDP, Turkey will remain reliant on highly volatile portfolio inflows, which generally speaking is not good for investor sentiment. It generates liquidity crunches if a local risk-aversion increases.

Another issue that sets Turkey apart within the emerging markets is that the pass-through from the exchange rate to inflation is extremely high. This means that the recent weakness of the Turkish Lira will translate into high inflation pressures down the road. In this environment, I personally cannot exclude the possibility of another rate hike in Turkey, which doesn't bode particularly well for fixed-income assets there.  


My final point is that Turkey is at the beginning of a multi-month election process, which is likely to keep political risks elevated. I would like to get your opinion on that because you have been covering Turkey for many years.


FINE: Turkey is vulnerable but it has always been vulnerable. It has never had enough reserves. Its real interest rates have never been that satisfying, and the political context is the worst I've seen it in twenty years. At the end of the day, Erdogan, maybe not Erdogan, but AK Parti probably survives, mainly due to the failures of the other parties.  It's going to be a big internal fight and we are going to see more headlines, particularly going into March. My view on elections is that they don’t create uncertainty, they invite uncertainty.  That invitation is large and with big, bolded letters for uncertainty there.  It's the first time in maybe fifteen years that Turkey has had this. For most people's investment lives, Turkey has been a strong and pretty good (policy wise) government and that might change.  The vulnerabilities that have always been there may actually become weaknesses. What you learned and what we're doing are very consistent.


- - - - - - - - - -

IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com


You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with its investments in emerging markets securities. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may also be subject to credit risk, interest rate risk, sovereign debt risk, tax risk, non-diversification risk and risks associated with non-investment grade securities. Please see the prospectus and summary prospectus for information on these and other risk considerations.


Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bond and bond funds will decrease in value as interest rates rise. Please read the prospectus and summary prospectus carefully before investing.


No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © 2014 Van Eck Global.

Van Eck Securities Corporation, Distributor

335 Madison Avenue, New York, NY 10017