By Marc Jones and Canan Sevgili
LONDON (Reuters) -Wild currency moves? Bazooka rate hikes? The many unknowns around Turkey's pivotal elections on Sunday are leaving even the most experienced investors hedging their bets on how markets will react.
The presidential vote, which could well require two rounds, is pitting President Tayyip Erdogan's vision of a heavily-managed economy and its repeated bouts of crisis, against a return to liberal orthodoxy under opposition challenger Kemal Kilicdaroglu that won't be easy either.
The latest survey by the closely-watched pollster Konda showed Kilicdaroglu more than five percentage points ahead of Erdogan, whose popularity has been hit by a cost-of-living crisis caused by rampant inflation.
Outcomes in the presidential and parliamentary elections range from Kilicdaroglu's six-party opposition alliance or Erdogan's AK Party making clean sweeps. The presidency and the parliament being split between them, parties scrambling to build parliamentary coalitions or the messiest option - the results not being accepted.
If neither Erdogan or Kilicdaroglu achieves more than 50% of votes cast on Sunday there would be a run-off on May 28.
"The period between the May 14 first round and second round on May 28 could be very volatile (for markets)," said Petar Atanasov, Co-Head of Sovereign Research and Strategy at specialist emerging market fund Gramercy, especially for an economy that has been extremely tightly managed.
"Some (emerging market-focused investors) are actually saying this is the election of the century".
The lira, which has lost almost 95% of its value over the last decade and a half, is expected to be the big mover.
Erdogan's heavy-handed insistence on low interest rates, plentiful credit and unconventional market management generally has sent foreign investors fleeing, though many say they are preparing to return if he is ousted.
Turkey's beaten down stock and bond markets rallied on Thursday on the news that one of the four presidential candidates had withdrawn from the race, a move seen as a further boost to Kilicdaroglu's chances.
Wall Street bank Citi has said resolutely orthodox policies, such as much higher interest rates, could attract $45-50 billion of foreign capital into the $900 billion economy as little as a year, though there are plenty more sobering forecasts too.
JPMorgan, for example, predicts the lira collapsing to almost 30 to the dollar from around 19.5 now if only modest policy changes happen. This week's huge spike in FX options also point to a hefty swing one way or the other.
Predicting the outcome of the election and moves in the lira and interest rates, "is the single biggest thing to get right (this year) in local EM markets," said Werner Gey van Pittius the Co-Head Emerging Market Fixed Income.
Markets could also lurch if Erdogan and the AK Party continue in power and push on with their unorthodox policies.
Fund manger GMO's Carl Ross warns that with currency reserves depleted and the pressures on banks and savers, they may face a full-blown crisis.
"On the whole, this is a bit of a house of cards," Ross explained, saying the artificial pumping up of the economy, inflation and currency problems and its dabbles with capital controls had echoes of market pariah Argentina.
The government says its rate cuts boosted exports and investments as part of a programme that encouraged lira holdings.
Turkey's still relatively-stable macro economic base and private sector meant the cards weren't toppling yet, "But another four years of the current set up and it could become much closer to an Argentina."
RATE EXPECTATIONS
Turkey still has much lower debt levels than most countries but that could change quickly in a crisis and the years of FX reserve depletion and erosion of central bank independence have left scars.
Credit ratings from Moody's and Fitch have slid from investment-grade in 2016 to "junk" - on a par with Bolivia and Cameroon and the share of international investors in both the its bond and equity markets and trading lira generally has slumped.
For those still investing in companies, if the lira dives and interest rates jump to 30%-40% or even 50% as market pricing suggests in the scenario of an opposition win, firms needing to borrow could be in trouble.
Share prices are cheap though. The price-to-earnings (PE) ratio on MSCI's dollar-denominated Turkey index is just over 3.7 compared to the emerging market-wide average of 12.41.
"Extremely low interest rates have made it attractive" Tunç Şatiroğlu, founder of financial consulting firm Kanal Finans said of the stock market. "Should the opposition win the elections I expect a dramatic rise in interest rates, thus drawing investors away."
(Reporting by Marc JonesEditing by Alexandra Hudson)