A $500 million sukuk from Turkiye Finans this 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 per cent of the deal, which received just under $2 billion 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,” said Georges Elhedery, head of global markets in the 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 $350 billion 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, fuelled an explosion of international issuance this year.
Turkish companies have issued about $9.5 billion of US dollar-denominated bonds so far this year, compared to a total of $16.5 billion for the whole of 2012, accoding to John Bates, corporate fixed income analyst for emerging markets at PineBridge Investments.
About $10 billion of last year’s Turkish issuance came in the final four months of the year, and was dominated by banks.