Marcus Booth in London -
The European Bank of Reconstruction and Development reportedly plans to buy a minority stake in Borsa Istanbul as the stock exchange continues its preparations for a planned IPO later this year. This is part of wider efforts by the Turkish government to turn Istanbul into one of the world's major financial centres.
According to unnamed sources quoted by Bloomberg on February 10, the EBRD is said to be in advanced talks to buy more than 5% of Borsa Istanbul, which is 49% owned by the government. Turkey’s main exchange is looking for investors that can provide it with technology and expertise to help it sell shares by 2016. The newswire notes that Borsa Istanbul in 2013 signed a cooperation agreement with the EBRD that covers the Balkans, Central Asia and the eastern Mediterranean.
These new developments come less than a month after the signing of a new partnership on January 20 with the London Stock Exchange, which had many high profile attendees, including Turkish Prime Minister Ahmet Davutoglu. The cooperation deal will allow the London Stock Exchange Derivatives Market to offer trading in futures and options on the BIST 30 index and other leading Turkish stocks.
Davutoglu pointed out that the country’s position makes it a natural stepping stone to the region and beyond, which will help turn Turkey into a major financial centre. “Turkey is a geographical centre and Istanbul is the area hub. On a four-hour flight you can reach over 60 countries from the city… After five or ten years, the target is that Istanbul will be one of the five biggest global financial centres."
Meyer Frucher, vice-chairman of NASDAQ OMX Group, predicted that, “Borsa Istanbul will be the most important exchange between Central Europe and Central Asia.”
The CEO of the London Stock Exchange Group, Xavier Rolet, also stressed that this partnership, “connects [London] with the best performing and fastest growing emerging exchange, which is right at Europe’s doorstep.” The contract, he said, “connects Istanbul to the largest pool of international equities, with over $2.5 trillion dollars of dedicated investible assets."
Davutoglu emphasised that, “being a financial centre is not a given, it is a result of policy… In the last few years [the government] has specially developed a strategy of visa liberalisation with more than 65 countries, and pre-trade agreements with more than 20 countries, just to make Turkey a regional hub."
But Turkey's equity markets still face many hurdles to overcome, and attracting enough liquidity remains chief among them. “Deepening capital markets is the substance of everything, because you may have a strong real industry but if you do not have a deep, sophisticated, diversified capital market with new capacities, that real sector may not have enough financial support and backing," said Davutoglu.
“Turkey’s strategy is to bring the real and financial sectors together and to support and encourage industrial production through the rise of the financial sector, with a strong banking background. Borsa Istanbul is the backbone of this strategy," the prime minister said.
Turkey will take over as president of the G20 in 2015 and is looking to use its geographical advantage to make Istanbul a global city and increase the Southeast European nation’s popularity as an investment destination.
To do this, Davutoglu plans to focus heavily on “qualitative changes to the economy,” with research and development, education and the quality of labour of utmost importance. “R&D share is now almost 1%. It was 0.5% when we came to power and we will make it 3% … It is the way to transform society,” he said.
As Mehmet Buyukeksi, chairman of Turkish Exporters Assembly, pointed out: “With one hand you can’t do much, but when you put two hands together you can achieve anything.”
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