Analyst sees gold chance in stocks
Güncelleme Tarihi:
by Ebru Tuncay - Referans
OluÅŸturulma Tarihi: Mart 14, 2009 00:00
ISTANBUL - The global crisis has bottomed out, according to Erkin Şahinöz, chief economist at Eczacıbaşı Securities in Istanbul. The US dollar will start to fall, while those investing in gold may suffer this year, Şahinöz says, adding that investors may start buying Turkish stocks provided they are able to ’forget that they have bought shares’ for the next 18 months
The U.S. dollar, having appreciated 11 percent against the Turkish Lira since the start of the year, has come to the end of the line, according to the chief economist at Eczacıbaşı Securities.Â
"The greenback will not rise to these levels anymore," Erkin Şahinöz told business daily Referans. "It will decrease to 1.50 liras." The U.S. dollar was trading at just above 1.70 liras on Friday, having fallen 5.7 percent since its peak of over 1.80 on March 9.
The dollar will trade between 1.50 and 1.70 liras for six months and then fall toward 1.50 liras, Şahinöz predicted. The stock market has also "seen the bottom," he said, noting that investors would not see such lows for the next seven or eight years. "It is time to invest in stocks," he said.
Şahinöz worked at the U.S. Federal Reserve between 2002 and 2006, under the leadership of both Alan Greenspan and Ben S. Bernanke. "The bottom for the Istanbul Stock Exchange is the level of 21,000 to 22,000. While the bottom for Dow Jones is between 6,500 and 6,800," he said.
"Long-term investors are looking at a golden opportunity both in Turkey and in the U.S. But investors have to ’forget’ these shares after they buy for 18 months. Not everybody can stand such turmoil. But after 18 month, returns will be realized," Şahinöz said.
Following the global trend
Last week’s sharp rise in the dollar is a reflection of the sharp selling in global markets, he said. "Turkey has fragility due to the gap in foreign financing, but one should not think that the country is being punished by foreigners and that is why the dollar is rising," Şahinöz said. "The rises and falls are completely in parallel with the global markets."
As foreign markets improve, the Turkish Lira will "relax" against the greenback, he predicted. "In the short term, the euro will also appreciate and the euro/dollar parity may rise toward 1.33."
Thus, the healing of global markets and euro’s appreciation against the dollar will push the dollar/lira parity down, Şahinöz said. "I don’t think it is possible for the dollar to remain above 1.80 liras. On the contrary, in the following weeks, it will retreat to around 1.70."
The spread between London Interbank Offered Rate, or Libor, and the Federal Reserve benchmark interest rate is narrowing, Şahinöz said. "The spread is way below its peak last year. And this means the worst has passed in the credit markets," he said.
"But Turkey may pass the crisis only by the start of next year."
"Europe will not pick up without the U.S. picking up first, and Turkey will not pick up before Europe," he told Referans. "The current crisis has a bipedal quality. When two negative factors come together, namely the crunch in credit markets and the problems in the real sector triggered by that crunch, they create an effect of the multiplier. Thus, the U.S. has to heal first."
Gold, which stood as the best performing investment instrument during the crisis, will lose this year, Şahinöz added. "An ounce will not again see the levels of $1,000," he said. "When the dollar retreats, so does gold. The latter appreciates when there is inflationary pressure. But [the world is] heading toward negative inflation. Foreigners will not buy gold in such circumstances. As the worst is behind us, gold will be negatively affected."
"The greenback will not rise to these levels anymore," Erkin Şahinöz told business daily Referans. "It will decrease to 1.50 liras." The U.S. dollar was trading at just above 1.70 liras on Friday, having fallen 5.7 percent since its peak of over 1.80 on March 9.
The dollar will trade between 1.50 and 1.70 liras for six months and then fall toward 1.50 liras, Şahinöz predicted. The stock market has also "seen the bottom," he said, noting that investors would not see such lows for the next seven or eight years. "It is time to invest in stocks," he said.
Şahinöz worked at the U.S. Federal Reserve between 2002 and 2006, under the leadership of both Alan Greenspan and Ben S. Bernanke. "The bottom for the Istanbul Stock Exchange is the level of 21,000 to 22,000. While the bottom for Dow Jones is between 6,500 and 6,800," he said.
"Long-term investors are looking at a golden opportunity both in Turkey and in the U.S. But investors have to ’forget’ these shares after they buy for 18 months. Not everybody can stand such turmoil. But after 18 month, returns will be realized," Şahinöz said.
Following the global trend
Last week’s sharp rise in the dollar is a reflection of the sharp selling in global markets, he said. "Turkey has fragility due to the gap in foreign financing, but one should not think that the country is being punished by foreigners and that is why the dollar is rising," Şahinöz said. "The rises and falls are completely in parallel with the global markets."
As foreign markets improve, the Turkish Lira will "relax" against the greenback, he predicted. "In the short term, the euro will also appreciate and the euro/dollar parity may rise toward 1.33."
Thus, the healing of global markets and euro’s appreciation against the dollar will push the dollar/lira parity down, Şahinöz said. "I don’t think it is possible for the dollar to remain above 1.80 liras. On the contrary, in the following weeks, it will retreat to around 1.70."
The spread between London Interbank Offered Rate, or Libor, and the Federal Reserve benchmark interest rate is narrowing, Şahinöz said. "The spread is way below its peak last year. And this means the worst has passed in the credit markets," he said.
"But Turkey may pass the crisis only by the start of next year."
"Europe will not pick up without the U.S. picking up first, and Turkey will not pick up before Europe," he told Referans. "The current crisis has a bipedal quality. When two negative factors come together, namely the crunch in credit markets and the problems in the real sector triggered by that crunch, they create an effect of the multiplier. Thus, the U.S. has to heal first."
Gold, which stood as the best performing investment instrument during the crisis, will lose this year, Şahinöz added. "An ounce will not again see the levels of $1,000," he said. "When the dollar retreats, so does gold. The latter appreciates when there is inflationary pressure. But [the world is] heading toward negative inflation. Foreigners will not buy gold in such circumstances. As the worst is behind us, gold will be negatively affected."