Istanbul bourse success: Turkey ‘has all the right pre-requisites’ for high profits in 2015

Transcript

At the end of 2014, the Istanbul bourse’s main index closed at an all time high, and became the fifth most profitable stock exchange. Will this success continue in 2015? World Finance talks to Ibrahim Turhan, CEO of Borsa Istanbul, to find out.

World Finance: So Ibrahim, how did the stock exchange end up yielding such high profits?
Ibrahim Turhan: Since Turkey has all the pre-requisites: demography, productivity, efficient market structure, openness to the rest of the world, a well-functioning private economy. This is the right combination; there is no magic in it. If you do the right thing, you get the right result.

World Finance: What industries will lead the market this year?
Ibrahim Turhan: Retail and private consumptions will get very strong outcomes, I guess. Simply because Turkey is still one of the countries that has positive growth. 3.2 percent for 2014 is a little bit disappointing for us; but we know that this is still the second highest in Europe, and the third in the OECD.

Turkey and European financial markets are deeply integrated

World Finance: Turkey sits on the cusp of Europe; how do you think quantitative easing will influence business?
Ibrahim Turhan: Turkey and European financial markets are deeply integrated. Any expansion from the European side will have a positive impact on Turkish economic activities, simply because the ease of financing investment will be there.

Turkey has by far the strongest fiscal outlook among not only all European markets, but also emerging markets.

By 2017, we are expecting to have a surplus budget. And this is very rare, especially nowadays.

So when the money will decide about its destination, the fiscal outlook will be a very important determining factor. And for this, Turkey has done the right job, I guess. And declining commodity prices – especially energy prices – are helping a lot.

World Finance: How has the Swiss decision not to peg its currency to the euro impacted the exchange?
Ibrahim Turhan: I always prefer to have monetary independence. If you are to peg your currency to another currency, sine qua non, it’s the homogeneity to offer your economy, especially against external shocks.

If this is not the case, you’d rather to remain independent. And from that angle, I should say that for Turkey it is a little bit too early to talk about pegging its currency to the euro.

World Finance: The exchange has ramped up relations with London recently; is this in some way a reaction to a perceived distancing of Turkey from the rest of the EU under President Erdogan?
Ibrahim Turhan: This is clear evidence and strong proof that Turkey is still an integrated part of the European financial system.

World Finance: There were suggestions last year that the country had sent arms to Syrian rebels, and the government had failed to commit to the US-led coalition against ISIS. Do you think the country’s attitude towards terrorism deflates investor appetite?
Ibrahim Turhan: Take for example Afghanistan; take Iraq; take Kosovo. Turkey has always acted together with the international coalitions, as long as the legitimacy is there.

Turkey has a long story of fighting against terrorism, and we condemn any kind of terrorism without any doubt.

So I think perception-wise, the perception may be different from each other. But we should close the gap between the reality and the perception. I don’t think that Turkey’s attitude towards terrorist activities will have any role except a good one.

World Finance: Volatility is expected in the second half of 2015, off the back of post-election uncertainty on economic management and policies. So how safe is Istanbul as a place to invest, compared to other emerging markets?
Ibrahim Turhan: The prime minister made it very clear. Last year we had two elections, and this year we will have one more.

Under normal conditions, when you have such a volatile political cycle, you expect the governments to act a little bit irresponsibly, and to increase spending. But in our case, contrary to this, what we observe is very prudent fiscal policy.

This is a clear sign that the economic policies are conducted in a very rational and market-friendly way.