Nick Vozianov, Director of Loan Syndications at ING noted that the majority of corporates in Turkey tend to tap the markets at the same time, usually around two times a year in Spring and Autumn.
“The top tier Turkish banks are all similar in their business profiles and have credit ratings which are on the whole in concert,” said John Bates, Head of Emerging Market Corporate Research at Pinebridge.
He added that as a result the banks tended to identify the same window of opportunity for borrowing, be it from the bond or the loan market.
There has been another trend across the Turkish corporate space that has seen them shift from the local to the international markets to access funding, with corporates increasingly looking to diversify their sources of funding.
“Since 2009 Turkish foreign currency debt has doubled to around US$140bn.”
Bates added that there has been a shift from local to foreign funding in Turkey because of the lower interest rates available abroad. For example, IS Bank’s 1 year lira-denominated local bonds are currently yielding around 9.5%, whereas the same bank’s US dollar-denominated 5 year Eurobonds are yielding around 5.1%.
Vozianov noted that there has been increasing Turkish activity in international markets because corporates are becoming more accustomed to international standardisation.
Despite wider concerns over the country, the willingness of foreign investors and lenders to invest in Turkish corporates has not been affected by Davutoglu’s resignation, as the performance of Turkish debt demonstrates.
“Pricing has not been impacted significantly, partly because the market has already ‘priced in’ a level of political uncertainty in Turkey. This is factored into the current credit ratings and investment premiums on Turkish debt,” Bates said.
Foreign markets are even proving popular with Turkey’s Islamic sector, which is still relatively nascent in the country.
The Islamic banking market constitutes around 5% of the total assets of the financial sector, and has remained small because Turkey’s conventional banking system is relatively mature and has historically been deep enough to service the needs of the country, according to Bates.
Turkiye Finans, through its subsidiary TFKB Varlik Kiralama announced plans for a euro-denominated sukuk. It will be the country’s first, and comes after a recent US-dollar denominated sukuk from Kuveyt Turk issued in February.
However, if Islamic finance becomes more popular it could prompt a return of Turkish corporates to the local markets. “Most of the banks have now established Sharia compliant entities as they have identified a large untapped Sharia client base in the mostly-Muslim country,” Bates stated.
Aktif Bank, through its subsidiary Aktif Bank Sukuk Varlık Kiralama has announced plans to issue a TRY100mn sukuk. Kuveyt Turk also recently debuted a TRY10mn privately issued sukuk, which was linked to CPI to protect investors from rising inflation in the country.