Turkey Shrugs Off Syria War Talk as Investors Spark Rally
ISTANBUL--Investors are flooding Turkey with cash even amid mounting risks that the country may get mired in the Syrian conflict, signaling that the demand for high returns from emerging markets is trumping fear in the current environment.
In the past weeks, forces loyal to Syrian President Bashar al-Assad have bombed opposition-held districts in Aleppo, a mere 30 miles from Turkey's border, while Turkish Prime Minister Recep Tayyip Erdogan has threatened to take steps against a Kurdish group in Syrian territory if it tries to set up camps across the border. That speaks to a dramatic escalation of tension between the one-time allies over the past two months: Syria in June downed a Turkish reconnaissance jet, to which Turkey has responded by deploying troops and heavy armor along the neighbors' 565-mile border.
Yet since June, investors poured about $12 billion into Turkey, doubling the assets purchased by foreigners this year and triggering a rally in government debt that pushed yields on the benchmark two-year bonds down as much as 1.72 percentage points to 7.75%, the lowest since September. The Istanbul Stock Exchange in the same period has risen 17% to more than 65,000, the highest since May 2011.
At work is rising risk appetite thanks to efforts by central banks in the developed world to support their economies. As the European Central Bank battles the euro-zone debt crisis and the Federal Reserve hints at a third round of economic stimulus to jump-start the U.S. economy, investors are poised to channel some of that cheap cash from central banks to Turkey, fund managers and analysts say. The country stands out among other emerging-market economies because data signals a rebalancing of the economy driven by surging exports but also underpinned by robust domestic demand.
http://online.wsj.com/article/BT-CO-20120731-708564.html
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