"Financials is number one because financials has been one of the sectors that has been hardest hit in Turkey, which is actually a little bit surprising because Turkish banks do not have any kind of subprime exposure, they do not invest in CDOs," Koen said.
Turkish banks are strongly capitalized, fund themselves from deposits not from the wholesale market and introduced many products that are new to the market, he explained.
"It's a sector that's growing very, very fast. A lot of financial instruments (such as mortgages or insurance products) have been introduced in Turkey only in the last few years," Koen added.
Construction stocks, with companies finding lucrative deals in Turkey but also in neighbouring developing countries, and consumer stocks banking on an increase in living standards are also good plays, he said.
Grey Economy Revealed
The Turkish statistics office has recently revised upwards gross domestic product figures to include more of the so-called informal economy – mainly unregistered and untaxed small businesses – into the official figures.
Nominal 2006 GDP was revised upwards by 31.6 percent, above the range of between 5 percent and 30 percent estimated in previous studies, Simon Quijano-Evans, EMEA analyst at UniCredit, said.
"The revisions are so substantial in our view that ratings agencies simply cannot ignore the implication they have on important ratios, and subsequently have to upgrade the credit, perhaps even by two notches – although they may need some time to assess the data changes," Quijano-Evans added in a market note.
The country's bid to join the European Union should further boost its capital markets, although some market players have said the convergence story was over, Koen said.
"For us, what matters is that the EU is a policy anchor for Turkey and as long as it moves in that direction I think the convergence story is still in place and we do not see a major change in that area," he said.
