Golden Global Investment Bank sees continued foreign funds inflow into Türkiye’s capital markets, spurring securities growth in a rally that began in 2023 after President Tayyip Erdogan secured an election victory and endorsed big interest rate hikes sought by markets to tackle runaway inflation.
Since commencing operations in June 2020 as Türkiye’s first investment bank dedicated to Islamic principles, the bank has noted positive economic changes within the nation, General Manager Yavuz Yeter told IFN Investor.
“When Türkiye’s economy was quite strong in the early 2010s, the share of international institutional investors in the stock market was around 60% to 70%. Due to the turmoil Türkiye experienced later, almost half of them left the stock market.
“We have been improving economically and our sovereign ratings were upgraded several times last year. If Türkiye’s economy continues to improve and the government continues with the reforms, tight fiscal and monetary policies, you may see further rating upgrades, and we may see more international investors coming back to the Istanbul stock exchange.”
Yavuz noted that the recent domestic financial turmoil led to listed company valuations being rather cheap for foreign investors, especially after factoring in the fall in Türkish lira values. Foreigners investing in the local exchange pushed up equities’ valuations and also boosted local fund operations.
Equity capital inflow rose 9% to US$5.5 billion in the first 11 months of 2024, showed data from the Turkish Central Bank.
Yavuz said: “In economic terms, inflation in a way feeds the stock markets. We have seen that in the US and almost the same happened in Türkiye. Returns on the equity market end up higher than inflation, that is basically in a nutshell among the main reasons for the big rally in Türkish equity markets.”
Another factor is the tight fiscal policy implemented to curb inflation, Yavuz explained – which “kind of put the brakes on lending”.
As businesses found it more difficult to have access to financing, they tapped the equity capital markets by issuing debt instruments or launched IPOs. “Due to this trend, we have seen a tremendous growth in investment funds and mutual funds that invest in equities and such securities.”
Stating that Türkiye currently has more than 60 licensed asset management companies, including those focused on Shariah compliant offerings, Yavuz is bullish on these developments to drive more investor demand in the domestic equity markets.