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In today’s Early Look (“Inflation is Popular”) Keith noted that Turkish inflation rose +9.6% in March year-over-year (but slowed for the first month in five).  While it’s true that inflation in Turkey is just one of the many inflationary signals we’re seeing across the globe, and rising inflation can be viewed negatively as it is a tax via rising prices on a country’s citizenry, chart 1 (below) shows that this level of inflation has held quite consistently since 2004. Further, this level of inflation is not inconsistent with that of an emerging market economy like Turkey.

Inflation has been one of the outcomes of Turkey’s Central Bank chopping 10.25 pp off its main interest rate since Nov. 2008 to weather the global economic downturn.  With rates held steady at 6.5% since Dec. ’09 and annual GDP growth of +6% in Q4, the Central Bank has issued concern over rising inflation, saying last month that it’s ready to raise rates if “increases in inflation expectations lead to a deterioration in price-setting.”

On 2/25 we put out a note titled “Why We Bought Turkey (TUR) Yesterday” in which we highlighted favorable upcoming GDP comparisons (chart 2).  To refresh, the intermediate term bottom in GDP of -14.7% in Q1 ’09 sets up for a very favorable comparison in Q1 ’10, and beyond. We’ve traded Turkey with the etf (TUR); according to Keith’s models TUR is trading well above its TREND line of support at $54.20 (chart 3) and the Istanbul Stock Exchange National 100 Index is up over 11% YTD.

Matthew Hedrick


Turkey in Perspective - T1

Turkey in Perspective - T2

Turkey in Perspective - T3