A wave of foreign investors is returning to Istanbul and Ankara after years of absence, holding numerous meetings to gauge the potential impact of the upcoming Turkish elections on the nation’s economy and financial markets, according to a Reuters report.
Large foreign lenders, such as BBVA and BNP Paribas, have organized trips and calls for clients to meet with current Turkish policymakers, opposition officials and advisers, Reuters said, citing bankers involved.
President Recep Tayyip Erdoğan’s unconventional policy approach, which included aggressive interest rate cuts amid soaring inflation, led to a heavily state-managed economy and prompted an exodus of foreign investors over the past five years.
However, as Erdoğan and his ruling alliance trail in some polls ahead of the May 14 elections, the opposition has vowed to abandon his policies and return to orthodox practices in the major emerging market economy. Investor visits and conference calls have increased in recent weeks and are expected to continue throughout April.
One source familiar with the plans told Reuters that a trip organized by Spanish lender BBVA next week would include clients representing approximately $1.5 trillion in debt-related assets across emerging markets. Investors are keen to understand the possible outcome of the elections, the key players involved and the proposed economic programs.
Foreign ownership of the Turkish lira-denominated bond market has plummeted to less than 1 percent from over 25 percent five years ago, according to government data. Analysts are divided over the potential impact of an opposition victory, with some predicting a sharp rally in the lira, while others foresee increased uncertainty due to possible monetary tightening and its impact on economic growth.
In addition to addressing more than 100 financial regulations implemented since the latest currency crash in late 2021, analysts suggest that a transition could be complicated by a personnel overhaul at the central bank, regulatory bodies and ministries. Citi, a Wall Street bank, recently held two days of meetings in Istanbul for bond and equity investors, describing the mood as “hopeful for positive change” but “tense” regarding the election outcome.
According to Reuters, sources indicate that not only Western but also Gulf-based investors are making inquiries about potential foreign direct investment (FDI) in addition to financial assets. One Western foreign investor planning to visit Turkey soon highlighted the opportunity to reconsider Turkey’s current “underweight” positioning among peer markets and noted, “If there will be a star among emerging markets this year, it will be Turkey.”