The flood gates open


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A $500m sukuk from Turkiye Finans last week was just the latest in a flood of international debt issues from Turkey. But the identity of the arranging banks, and the investors who bought the issue, pointed to a shift in capital markets.

Of the four banks arranging the deal for Turkiye Finans, an Islamic bank majority-owned by Saudi Arabia’s National Commercial Bank, two were based in the Gulf: NCB Capital and Dubai’s Noor Islamic Bank.

And Middle Eastern investors dominated buying of the sukuk, taking 51 percent of the deal, which received just under $2bn in orders. In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons.

“You will find more demand from investors in this region, in particular banks which are fairly liquid and sovereign wealth funds, to invest in financing in Turkey, be it through private placements, new issuances, or the public debt capital markets space,” says Georges Elhedery, head of global markets in the Middle East and North Africa (MENA) for HSBC.

“These investment flows are a developing trend as Turkey, which has a low savings rate, looks to tap the deep and liquid capital pools in MENA to fund its 2023 Vision, which includes investing some $350bn in transport and other infrastructure.”

Turkey’s upgrade to investment status by Fitch Ratings last November, and expectations that it will secure similar ratings from the other two major agencies, have fuelled an explosion of international issuance this year.

Turkish companies have issued about $9.5bn of US dollar-denominated bonds so far this year, compared to a total of $16.5bn for the whole of 2012, according to John Bates, corporate fixed income analyst for emerging markets at PineBridge Investments.

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