JPMorgan Is Banking on Pent-Up Demand to Reignite Turkey IPOs

(Bloomberg) -- JPMorgan Chase & Co. expects Turkey's capital markets to come back to life as inflation and interest rates decline, reigniting investor interest as the economy stabilizes.

“IPO demand is accumulating in Turkey and when markets normalize, there should be initial public offerings, secondary public offerings and accelerated book buildings,” Mustafa Bagriacik, chief executive officer of the lender's Istanbul unit, said in an interview. “Demand and risk appetite for Turkey will be there once predictability is there; because investors are generally underweight Turkey.”

Initial public offerings have just about ground to a halt, with only three share sales this year worth $23 million, as economic growth stalled, and in the wake of the lira's crash to an all-time low at the end of 2018. The currency has since rebounded and is the best-performing emerging-market currency this half, while new central bank governor Murat Uysal cut rates by a record last month, citing an improved inflation outlook.

Activity from banks is also expected to start improving from September as lenders increase their borrowing to bolster their capital levels, Bagriacik said. The CEO also expects new issuance from the corporate sector, he said, declining to identify specific deals.

More highlights from the interview:

• “Markets are waiting for a little bit of clarity on the M&A side. What I mean by clarity is to have predictability on macroeconomics, currency and growth. I expect we will see more investment from China, as part of their Belt and Road Initiative. They are long-term investors.

• “Profit and loss predictability of a company is very important for investors and it comes from growth and cash flow. In industries like logistics, health care and infrastructure, where you have hard-currency P&L, there will be more appetite from foreign investors.

• “We believe it's good for an economy to allow banks to work effectively, because that ultimately means they can lend more.

• “The challenge for the Turkish economy will be about how quickly it can recover and reach 3%-4% annual growth. As a nation, we should be able to create a recovery story without additional external financing, but we need to have the right structural reforms in place.”

To contact the reporters on this story: Asli Kandemir in Istanbul at akandemir@bloomberg.net;Ercan Ersoy in Istanbul at eersoy@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Ross Larsen

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