Istanbulls unfazed by turmoil

Turkey's stockmarket has shaken off May's political turmoil and hit a record peak this month. Prime minister Recep Tayyip Erdogan was forced to call an early general election for 22 July after military sabre-rattling (the army sensed a threat to the secular republic) derailed his attempt to get a former Islamist elected president by parliament. But Erdogan is ahead in the polls and he has overseen an economic transformation over the past few years, says Gerd Hoehler on Handelsblatt. Growth has averaged 7% a year since 2002 and inflation has receded from 60% to single digits, while tame June inflation figures imply scope for lower interest rates.

Even if the reformist Erdogan ends up heading a coalition rather than ruling alone, the political backdrop seems likely to remain positive, reckons Manfred Zourek of Espa Stock Instanbul. Credit Suisse, which expects a "benign outcome" from the recent political turmoil, is currently especially keen on banking stocks, which it says are on a large discount to their regional peers. The main issue for Turkey is global risk appetite; it is widely deemed a particularly vulnerable emerging market when liquidity dries up, thanks to its large current-account deficit. But as long as risk appetite remains strong, sentiment in Istanbul is set to remain bullish, says Lars Christensen of Danske Bank.

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