by Bob Stokes
Updated: May 19, 2017
How could the attempted military coup in Turkey in July 2016 have possibly been a bullish sign for Turkish stocks? Get our insights -- and see two charts that show the price story.
[Editor's Note: The text version of the story is below.]
On May 16, President Erdogan of Turkey met with President Trump in Washington D.C. That evening, violence erupted between protesters and Turkish security forces outside of the Turkish ambassador's residence. Eleven people were injured.
Turkey and Erdogan were in the news in an even bigger way after an attempted military coup in Turkey on July 15, 2016, as you may recall.
Erdogan's response was harsh: He declared a three-month national state of emergency and ordered the killing of more than 250 people. He also closed more than 130 media organizations and suspended or ousted more than 60,000 from their jobs in the military, the government and academia.
The unrest probably appeared to be bearish for investors in the nation's stock market.
But our August 2016 Asian-Pacific Financial Forecast showed this chart and said:
All [the] upheaval notwithstanding, the authoritarian crackdown actually supports a bullish forecast for Turkish stocks. Here's why.
At the time of the coup attempt, Turkey's ISE-100 Index was tracing out the final stages of a contracting triangle pattern that began at its 2013 high. Wave d of the pattern equaled about 61.8% of wave b, a common relationship. And wave e so far appears to have ended near the triangle's a-c line, a common occurrence. The timing of the coup attempt filled out the picture of an ending corrective pattern. ...
Erdogan may indeed be turning more authoritarian, but stock markets have a long history of booming after strongmen tighten their grip on power.
Fast forward to our May 2017 Asian-Pacific Financial Forecast. Review this chart and commentary:
Turkey's authoritarian leader, Recep Tayyip Erdogan, has consolidated power and will be able to potentially extend his 14-year rule by 10 years or so, thanks to having won the mid-April referendum. This turn of events bears out the forecast we made following the failed coup against him in July 2016. ...
"It's not that authoritarian leaders inspire bull markets. Rather, it's that the fear that attends bear markets helps authoritarian leaders expand their power and influence, even after a bull market has begun."
Our Asian-Pacific Financial Forecast analyst applies the same analytical approach to other markets including China, Japan, Hong Kong, India, Australia and more.