Turkey’s Geopolitical Geometry Gist
Turkish shares prolonged positive momentum as Prime Minister Erdogan marked a decade in power with a bid to end the armed Kurdish conflict aggravated by Syria’s civil war through constitutional changes on language and political rights which jailed PKK leader Ocalan agreed to consider. The initiative coincided with the 10th anniversary as well of the US invasion of Iraq as firms vie for joint ventures in the oil-rich North after winning many construction contracts awarded by Western donors over the period. Outreach to GCC markets also continued as a Qatari bank acquired a local lender after an inaugural $1.5 billion sovereign sukuk was placed last September. Islamic banking sector assets were up 12 percent to $750 million according to the industry regulator aided by tax law revisions and Gulf investment and tourism. The capital market overseer for its part has been embroiled in a cross-border dispute over the fate of heavyweight Turkcell and appointed several board members who may embed Turkish control as court actions proceed in New York and elsewhere. In EU relations France has dropped former objections to accession talks, and the new Greek Cypriot president may reintroduce a re-unification plan that was rejected a decade ago in an effort to seize the diplomatic high-ground as the $10 billion IMF-European economic rescue becomes operational. The poorer enclave hopes to draw money and visitors across the line with the troubles in Nicosia and Limassol and may reconsider an open-skies agreement to facilitate its international profile. With better GDP growth this year around 5 percent as credit, inflation and the current account deficit taper the prime minister is poised to recast his government sway as president and has met with key military figures to obtain support. The central bank’s multiple rates continue to create monetary and exchange rate policy confusion, but on the fiscal front performance has been solid and FDI is set to improve with big infrastructure project tenders. Exports may recede without a repeat of gold sales to Iran but sanctions by the Financial Action Task Force are no longer imminent with fresh anti-terror and money laundering provisions for Tehran transactions.
Ankara has expressed a willingness to resume bilateral aid to Cairo once an IMF package is signed and parliamentary elections are rescheduled, and endorsed Libya’s recent $2 billion offer to bolster reserves in the meantime. Through the Federation of Euro-Asian exchanges Istanbul has reiterated regional hub intentions as it focuses on recruiting more family-owned listings at home. Bank shares are currently one-third of the $350 billion capitalization, and the related derivatives and corporate bond markets are competing in the wider securities space. As the sovereign rating may be lifted to investment-grade by all agencies, the biggest brewer got that notch for the first time in a $500 million 10-year issue last year that confounded traditional calculations.
