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Turkey’s chicken-and-egg capital markets

All economic indicators suggest the country is a global growth market. Except one: its capital markets are small and underdeveloped. Bankers bemoan a lack of investors; investors say there are not enough products. A new stock exchange head aims to break the impasse. Could SMEs bring the market out of its shell?

The countries surrounding Turkey are going through tumultuous times: to the west the debt-stricken countries of the eurozone; to the south the countries of the Middle East – many in various states of revolution and turmoil. Not that anyone thinks the turmoil is likely to spread to Turkey. Rather the opposite. The country seems an oasis of calm surrounded by uncertainty. "We have seen little impact from politics in the region so far. We’ve never seen so much foreign interest in Turkey," says Selim Kervanci, head of global banking for Turkey at HSBC.

The real impact for Turkey lies in the harm done to its exports in the region: Libya, Syria and Iran – all big trade partners for Turkey – have been hit with UN-imposed sanctions. And trade with other countries in the throes of political change, such as Egypt, will suffer uncertainty for some time.

"The Arab Spring has changed everything," says Ilhami Koc, chief executive of Is Investment. "We are exporting far less to the Middle East. But these markets will reopen and be rediscovered by Turkish corporates." It would seem overly ambitious to say that Iran or Syria will return to their former status as big trade partners in the near future, but there are other markets in Turkey’s sights.

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