Şimşek set to meet foreign investors as eyes on Central Bank

ISTANBUL

Treasury and Finance Minister Mehmet Şimşek will meet with foreign investors on Sept. 19 at an event organized by Goldman Sachs in New York as Türkiye’s Central Bank is set to announce its rate decision later in the week.

Foreign investors have turned their attention to the Turkish markets again after the new economic team was installed after the May elections. Another key development in the Turkish economy was the launch of the government’s new medium-term program earlier this month.

Şimşek reiterated on Sept. 15 that lowering inflation permanently, disinflation and ensuring price stability are among the new program’s main objectives.

“We are determined to fight inflation to put Türkiye back on a high, sustainable and balanced growth path… We must first establish macro-financial stability. Fiscal and monetary policies will be harmonized,” he said.

The markets, on the other hand, will keep a close eye on the Central Bank’s rate-setting meeting on Sept. 21, with some analysts expecting the bank to deliver a 500bps increase in the main policy rate.

The bank has already hiked the one-week repo auction rate by 1,650 bps this year to 25 percent.

Foreign investors welcome the measures taken in the past months, officials said, voicing hopes that foreign interest in the Turkish economy will grow further in the period ahead.

Six months ago, foreign investors were not interested in Türkiye, but now this is changing, said Kerim Kotan from Ventura Partners, which advises companies on M&A transactions.

“They now want to be done with deals before evaluations go up and their competitors enter the market.”

Transparency and predictability are key to luring record foreign direct investments (FDI), he stressed. 

“I think the volume of M&A transactions will be around $10 billion this year. If the economic management team won’t change in 2024 and 2025, we may see foreign direct investments exceed the $20 billion level, which was recorded 10 years ago.”

Exporting companies that are competitive and produce high-quality products attract more attention from foreign investors, according to Kotan.

“Foreigners are more concerned about whether there are barriers to entry into the market as well as political and economic stability, global competitiveness and ease of doing business, he noted.

M&A transactions in Türkiye, which stood at $20 billion and $25 billion in 2012-2013, declined to around $10 billion in 2021-22 due to heightened geopolitical risks, the decrease in the country’s credit rating and the changes in economic policies, Kotan said.

Türkiye is likely to achieve great economic success within the next one or two years, and in this case, FDIs and M&As may hit record levels, he said.

“I see it very likely that many foreign private equity funds and investment banks that have left Türkiye in the last seven to eight years will return and open offices in the near future.”

Foreign investors will probably focus more on Türkiye’s energy and defense sectors in the upcoming period, according to Kaan Nazlı, senior economist at Neuberger Berman.

Inflows into Turkish stocks could continue with the normalization of economic policies, he said.