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Fund managers are increasingly upping their exposure to Turkey, as political and economic pressures have eased over the summer.

Ghadir Abu Leil-Cooper, head of the emerging Europe, Middle East and Africa team at Baring Asset Management, said: “Up till June, Turkey had a terrible performance, but several factors then helped it recover.”

At the beginning of this year, Turkey’s economy, heavily dependent on oil, was suffering from rising commodity prices. It was running a very high current account deficit that required external financing at a time when credit was drying up. This situation was then exacerbated in June, when legal action was started to outlaw the governing AK Party.

Mr Abu Leil-Cooper said: "Since then, the high court has ruled the AKP is legal, which has ended the political risk. Oil prices have come off their peak, which helps Turkey’s current account. And the central bank has removed the credit tightening it had put in place. All this has eased the problems, and valuations have been looking cheap.”

Stuart Richards, manager of the £25m Hexam Emerging European fund, raised his portfolio's Turkey weighting from 6 per cent to 18 per cent in July. The fund’s exposure is now 19.5 per cent.

Mr Richards said: “By June, most of the bad news had been priced into the market. What Turkey needs most of all is foreign capital, and its political stability and reform has attracted foreign investment.”

He predicted Turkey would perform very strongly for the rest of this year.

"Over the last month, inflation expectations have peaked, so the expectation of high interest rates is diminishing. The domestic economy has held up more than people were expecting, and second-quarter earnings have beaten expectations.”

Elena Shaftan, head of Jupiter’s emerging European equity team, said: “Falling oil prices should improve the macro outlook for Turkey – a $10 decline in the oil price is estimated to improve the current account balance by $0.5bn and reduce inflation by approximately 0.5 per cent."