"Emerging-market equities are the darling of global markets," Isik Okte of BNP Paribas told Bloomberg. And Turkish stocks have just reached a new record. So it's no wonder local firms are lining up to float, with initial public offerings (IPOs) worth up to $4bn expected this year. That would eclipse 2007's all-time high.
But there's another incentive to tap global equity investors' funds and it highlights the economy's vulnerability. Turkish companies have racked up a record $326bn of foreign-currency debt. Many have already restructured their loans, and have now opted to tap the equity markets instead. Their borrowings will become more expensive as the local currency, the lira, weakens.
Sadly, it is doing exactly that, as The Economist points out. It has slipped by 40% against the dollar in two years, a result of concern over the government's authoritarianism and tendency to harangue the central bank when it tries to temper inflation with interest-rate hikes. Throw in a state spending spree and a credit bonanza over the past year, and Turkey's boom could turn to bust quickly. Its current-account deficit of 4.7% of GDP means it is especially vulnerable to foreign capital turning tail if sentiment towards emerging markets shifts. Steer clear.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
Will bond vigilantes come for Donald Trump?Bond vigilantes could make a comeback if Donald Trump follows through on some of his promised policies
