Investors are flooding Turkey with cash even amid mounting risks 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.
Since June 1, 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's ISE 100 index since early June was up 17% to 65032.05 on Monday, the highest since May 2011.
In the past decade, Turkey's economy expanded an average 5.5% annually, while per capita income tripled to more than $10,000 and exports surged to a record $135 billion in 2011.
Crafting a foreign policy of trade first, diplomacy later, Turkey recently has pursued economic interests more aggressively than political power.
"The assumption is that Turkey's government, for all its rhetoric, will always act cautiously and pretty much follow the line favored by its Western allies, said Robert O'Daly, a senior analyst at the Economist Intelligence Unit in London. "And therefore it won't get sucked into the Syrian conflict."
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