Emerging Europe has been enjoying a mini-boom in IPOs.
Poland, Russia and Kazakhstan have produced deals worth $1 billion or more since September. Even tiny Lithuania made headlines with a chunky listing of local utility Ignitis.
One name, however, has been conspicuously absent from this list.
Turkey, the region’s second-largest economy, has not produced an IPO of even the size of Ignitis for two and a half years – and bankers say that is unlikely to change in the near future.
Of course, this is not the only sense in which Turkey has been an outlier in central and eastern Europe (CEE) this year.
Covid crisis
While policymakers in much of the region have won plaudits for their economic stewardship during the Covid crisis, the Turkish government has notoriously exacerbated the situation by burning through foreign-exchange reserves and imposing currency controls in a vain attempt to prop up the lira without raising interest rates.
Opinion seems to be divided as to whether this was at the behest of president Recep Tayyip Erdogan, a persistent advocate of the theory that high interest rates cause inflation, or his son-in-law Berat Albayrak, whose undistinguished two-year tenure as finance minister came to an abrupt end when he resigned via Instagram on November 8.
Those hoping for a revival in the country’s primary equity markets should probably not hold their breath
Either way, Turkey now appears – for the moment, at least – to be set on a more orthodox economic path. Albayrak’s departure came the day after Erdogan’s sacking of compliant central bank governor Murat Aysal.
His replacement, Naci Agbal, hiked rates by 475 basis points two weeks later.
He also oversaw the lifting of a rule linking banks’ reserve ratio requirements to credit growth, part of a broader push during the past year to pressure Turkey’s private-sector banks to step up lending in a bid to revive the economy.
Long term
Given Erdogan’s recent track record of bowing to market pressure only when in extremis, and backsliding swiftly once disaster has been averted, some observers remain sceptical about Turkey’s longer-term economic direction.
Nevertheless, November’s reshuffle seems to have gone some way to convincing international investors – always keen to believe the best of an emerging market with stable leadership, a large domestic market and strong demographics – that Turkey is once again moving in the right direction.
However, those hoping for a revival in the country’s primary equity markets should probably not hold their breath. Turkey may have a young population, but so far it has failed to develop the type of tech and ecommerce companies that drew investors to other CEE markets over the autumn.
Until that changes, Turkish IPOs will likely remain of more interest to locals than big-spending global funds.
