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Daily Telegraph: Economists recommend defensive action amid fears of Turkish coup

EXTRACT: Oil giants Shell and BP are in Turkey, as are Cadbury Schweppes and British Airways.

By Philip Aldrick
Last Updated: 1:19am BST 01/05/2007

Fears of a military coup sent Turkey’s stock market and currency tumbling yesterday.
The Turkish lira suffered its largest drop in seven months amidst fears of a military coup.
The Turkish lira slid 2.43pc, its largest drop in seven months, and the main stock market index fell 4pc, wiping $7.8bn (£3.9bn) from share values, as economists recommended taking “a defensive strategy to Turkish assets” amid fears for the country’s democracy.

British companies in Turkey were keeping a close eye on developments. Among the largest is HSBC, which made $217m profit in Turkey last year and employs 5,300 staff.

A spokesman said the bank planned to grow its branch network “significantly” from 192 over the next two years and the strategy “had not changed” despite the army’s warning on Sunday that it would “take action” if Turkey’s secularism was threatened by elections.

British companies have been rapidly growing their presence in Turkey. In 2005, Vodafone bought Telsim, Turkey’s second largest mobile phone group, for $4.55bn, citing the attractive demographics of the fast-growing and young population. Tesco has 4,500 staff at 20 stores. GlaxoSmithKline employs 730, mostly sales, staff and British American Tobacco has 300 people on the payroll.

Oil giants Shell and BP are in Turkey, as are Cadbury Schweppes and British Airways.

Deutsche Bank’s chief economist for Turkey Tevfik Aksoy said foreigners are worryingly exposed to the Turkish markets. He said: “Local investors’ perception of political risk has manifested itself with the rise in foreign exchange deposits. By contrast, non-residents have been building positions in the local debt market as well as equities.”

The main stock market index reached an all-time high on April 25 and has climbed 15pc this year, more than double the gain for MSCI benchmark emerging market index. Turkey received a record $19.8bn in foreign investment last year and economic growth has averaged 7pc since.

Figures from the Office of National Statistics show British exports to Turkey were up 11pc in 2006, driven by financial services.

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