Stefan Weiler from US investment bank J.P. Morgan said, “A large part of the international investor community is interested in Turkiye again. So we see that the tide is changing, but this does not mean that all investors are returning.”
Weiler, Head of Central and Eastern Europe, Middle East and Africa (CEEMEA) Debt Capital Markets of the US investment bank J.P Morgan, answered questions about the developments in the Turkish economy and the approach of international investors to Turkiye.
Stating that they have seen a significant change in the markets’ approach to Turkiye since the elections held last year, Weiler stated that the new economic management gives credibility to the policy change.
Weiler emphasized that many developments and optimism have already been priced in since the election, and that although Turkiye’s credit rating is B, its recent performance is comparable to the BB credit rating, and said, “The market is already pricing and expecting rating increases.”
Pointing out that a significant portion of foreign investments came out before the changes in Turkiye’s macroeconomic policies, Weiler said, “A large part of the international investor community is interested in Turkiye again. In other words, we see that the tide is changing, but this does not mean that all investors returned.”
Weiler underlined that there are investors who think they need more time to allocate their resources to Turkiye and feel comfortable, and that investors want clarity, and continued as follows:
“This month, we had a seminar in New York for the Central Bank of the Republic of Turkiye (CBRT) attended by more than 150 investors. Minister Mehmet Simsek and President Hafize Gaye Erkan shared with investors the impact of the changes they made here and what other changes can be expected. In that respect, I would say that the impact of the changes in policy has been strong so far.”
“We foresee a record year for all bond issuances in Turkiye”
Weiler stated that the CBRT should continue the guidance it gives to the market regarding the fight against inflation, and this may mean continuing the interest rate increase, and said, “The market thinks that the peak in interest rates is approaching, but there is also an increase expectation for tomorrow.”
Reminding that inflation in Turkiye is over 60% and interest rates are at 42.5%, Weiler said that a positive real rate return should be provided in order to attract more investor inflow.
Weiler stated that although there has been some progress in this regard, there is still progress to be made and said:
“However, the trend for the Turkish economy looks quite positive and we are very optimistic. We foresee a record year for all bond issuances in Turkiye, including companies and the state. The previous record level was $20 billion, last year it was $17 billion. There is nothing official, but in my personal opinion, I expect a bond issue size of over $25 billion this year.”
“We expect more rating increases this year”
Weiler, who also shared his views on the recent updates of international credit rating agencies regarding Turkiye’s credit and rating outlook, made the following assessment:
“Turkiye’s outlook was recently upgraded by Moody’s. When we look at Turkiye’s fundamentals and the ratings of credit rating agencies, we think there is a strong potential for a rating increase this year. As JP Morgan, we expect more rating increases this year. However, given that Turkiye is currently rated a single B, it will take some time for it to return to an investment grade credit rating.”
Nick Eisinger, Global Co-Head of Emerging Markets Active Fixed Income at Vanguard, the world’s second largest asset manager with approximately $8 trillion, said last week that they always have Turkish government bonds in their portfolios. “Considering the CBRT’s moves in interest policy, the future inflation path and the very low availability of Turkish government’s local bonds to foreign investors, we recently decided to deal with TL-denominated government bonds.”
In the news in the international press, it was stated that the US investment management company PIMCO had been purchasing TL-denominated bonds since the second half of last year, with the influence of the policy change.
Source: Trthaber / Prepared by Irem Yildiz