Talking to bankers and analysts about Turkey in late February and early March was an odd experience. On almost every front there had been progress over the past 12 months and Turkish assets were in demand, from sovereign bonds to second-tier banks. But there was also a sense that investors were ignoring the full picture and accepting a simplistic view of what is a far more complex situation.
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The Turkish economy continues to satisfy most economists’ wish-lists, with high growth, falling inflation and a primary fiscal surplus. Even the problems – such as a high current account deficit and the lack of a new IMF agreement – don’t seem to be worrying many observers. And if the country can only get through the next couple of years, Turkey will really have broken the mould. Paul Farrow reports.
Getting a date for negotiations to begin on EU membership is one of the main achievements of the current Turkish government. But according to Sedat Aybar, if Prime Minister Recip Tayyip Erdogan wants to really leave his mark on the country, he has to tackle some fundamental political and economic problems.
Turkey’s banks have benefited from the country’s economic success in the last couple of years, and increased their lending by focusing on consumers. The prospect of EU convergence is already attracting foreign banks to the market, providing a great opportunity for those with a Turkish bank to sell, but bringing the threat of greater competition for those local institutions that do not. Paul Farrow reports.
After months of spread tightening and a string of positive news items, the wheels came off Turkish bonds in March following a reverse in the US Treasury market. With over half its 2005 international funding in the bag, the sovereign isn’t worried, but this move seems to have upset hopes for non-sovereign issuance. John Weavers reports.
The international Turkish lira bond market has enjoyed an explosion of issuance since the beginning of the year, following a rebasing of the currency and ahead of negotiations for EU membership. Volumes have far surpassed expectations, and bankers believe that this is only the beginning. Helen Bartholomew reports.
In a benign 2004, Turkish bank borrowers were able to put in place record-sized loans at prices not seen since before the country’s 2001 crisis. With the top tier looking to repeat that success this year, the oft-promised stretching of the traditional one-year tenor to two is a real possibility. Meanwhile, falling pricing for the top borrowers is only likely to fuel lenders’ appetite for small banks and a burgeoning corporate market. David Cox reports.
The equity capital markets continue to offer a mixed picture in Turkey. While the secondary market was one of the top global performers in 2004, the picture in ECM was much more confused. Paul Farrow looks at the reasons for success and failure in the past, and the outlook for ECM activity over the next 12 months.
A suitable legislative framework and its subsequent enforcement are essential to encourage foreign investment. In recent years, Turkey has suffered from a low ratio of foreign direct investment to GDP, as well as a series of headline-grabbing scandals, particularly in the banking sector. But with significant legislative change on the way, are there signs of a fundamental shift in the treatment of investors? Paul Farrow reports.
The Capital Markets Board of Turkey has the job of regulating financial markets, plus a remit that extends to issues like mortgages. As the government bids to introduce a series of new laws, make tax changes and maintain low inflation, with a resulting expansion in the range of financial instruments, the CMB’s role looks set to increase. Paul Farrow reports.