U.S. money managers Cumberland Advisors - with $2.3 billion assets under management - has cut its investments in Turkey to zero, fearing political unrest in the country will escalate and put the brakes on growth that's already slowed sharply to 2.2 percent last year.
(Read More: Turkey Violence: More Complex Than Arab Spring)
Demonstrations, now in their fifth day, are spreading across the country and the largely middle class protesters are challenging what they say is Prime Minister Recep Tayyip Erdogan's autocratic rule. Turkey's stock market plunged 10 percent on Monday in response, the most in a decade and Turkish bonds had their largest surge on record.
David Kotok, Cumberland's chief investment officer feared "more (stock market) weakness if social unrest intensifies" in the country. "We have taken Turkey to zero. Contagion risk is rising," Kotok told CNBC in an emailed response to questions.
However, Cumberland is not writing off the emerging market entirely. "The Turkish economy and equity market still looks attractive to us over the long run if the country can resolve this cultural conflict," said Bill Witherell, Cumberland's Chief Global Economist in a commentary published on June 4. "For the time being, we prefer to watch from the sidelines."
Cumberland is not alone in adopting a cautious stance towards Turkey - the eighteenth largest economy in the world in 2011 - and its stock market, whose total market capitalization stood close to $300 billion in 2012.
Tim Ash, head of emerging market research at Standard Bank, said in a note that he would recommend that investors reduce exposure to Turkey, the Financial Times reported on June 4. "Simply put on a risk-rewards basis, Turkey does not appear to offer convincing value at present, and investors would be well advised to adopt a cautious approach," the newspaper cited Ash as saying.
(Read More: Turkish Stocks Drop 10.5% on Fourth Day of Protests)
Meanwhile, investors in Turkey's fast-growing Islamic finance business expressed some worries about the unrest - which some observers say is characterized by tensions between the Islamist-leaning government and secular middle-class Turks -- though were confident that the longer term prospects remain intact.
"It's a concern," Hussain Al Qemzi, CEO of Noor Islamic Bank told CNBC's "Squawk Box" on Wednesday. "It affects business in terms of certainty but Islamic banking has been around for quite some time (in Turkey), and it's a very important Islamic finance center."
Turkey is developing an Islamic finance industry which could rival current volumes in Malaysia - the world's top issuer of Islamic bonds - within 10 years, Reuters reported on May 29.