Turkey Looks for Change

The UK has confirmed that it is supplying long range weapons to Ukraine. Ben Wallace confirmed that the Storm Shadow cruise missiles are on the way, or already in country though Ukraine has given assurances that they will not be targeting anything outside of Ukraine. The missiles have a range of more than 150 miles and cost more than £2m each. Russia has threatened a military response.

The US has accused South Africa of supplying Russia with weapons and ammunition
through a covert operation. South Africa have responded by setting up an independent

inquiry to look into the allegations. The US has asked the government there to start “practicing its non-alignment policy” whilst the main opposition party has accused the government of the government of being “in favour of a global warmongerer and despot” and risking major consequences. The South African rand fell sharply on the news. The Guardian has more: www.theguardian.com/world/2023/may/11/us-accuses-south-africa-of-providing-arms-to-russia-reports

Turkey goes to the polls this weekend and the election is likely to be incumbent president Erdogan’s toughest challenge. Up until yesterday this was a four-horse race, with two contenders far more favored than the others (President Erdogan and Kemal Kilicdaroglu), but with polling numbers that saw both of them short of a 50% majority, that would have avoided a run-off later in the month. Yesterday though, one of the candidates withdrew and it is likely that their supporters could now switch their votes to Kilicdaroglu and this might just tip them over the edge and mean an end to nearly 20 years of Erdogan at the top of Turkish politics. Kilicdaroglu is eager to reverse Erdogan’s unconventional economic policies but, if he does win, change won’t come overnight.

International investors have been pulling cash out of the country consistently for almost a decade and though they’ll be keen to see change, they’re not likely to jump in with both feet straight away. Inflation in Turkey is currently around 50%, though that is down from 85% in October, whilst interest rates are ‘only’ 8.5% and GDP growth is below 1%. Foreign exchange reserves are practically non-existent as it’s all been spent in propping up the currency, which is trading at 20 lira to the Dollar, whereas only three years ago is was 6 and ten years ago it was below 2. Trading Turkish stocks, interest rates or the currency is a brave endeavour at the best of times and this week has seen volatility spike across the board, so ‘chaotic’ seems like an appropriate description of what we could see in the next few trading sessions.

Have a great weekend