Fitch Ratings highlights increased investor confidence in Turkish debt capital market

(MENAFN) Fitch Ratings announced on Wednesday that the Turkish debt capital market (DCM) has experienced a boost in investor confidence, which is attributed to a shift towards more traditional macroeconomic policies. This positive change in sentiment is expected to continue driving the Turkish DCM primarily through sovereign financing, efforts to diversify funding, and initiatives to develop Islamic finance over the next two years, as detailed in a recent report by the agency.

Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings, commented on the recent resurgence in foreign-currency debt issuances. He noted that this revival indicates a reduction in near-term refinancing risks, which is a direct result of the improved investor sentiment following Turkey’s adoption of more conventional macroeconomic strategies. This shift has helped to lower the risks associated with refinancing, reflecting greater confidence from international investors.

The report also suggests that, while banks and corporations in Turkey will continue to participate in the DCM, their share will remain smaller compared to sovereign issuances. This is largely because the high costs involved mean that corporate issuances will be mostly opportunistic rather than a regular occurrence. Despite this, the medium-term outlook for the Turkish DCM is promising, with projections indicating that it will surpass USD450 billion in outstanding debt. Additionally, the issuance of sukuk, or Islamic bonds, is expected to exceed 20 percent of the total issuance mix.

Al Natoor further highlighted the significant external debt burden Turkey faces, with over USD225 billion in external debt maturing within the next 12 months as of December 2023. This substantial amount underscores Turkey's vulnerability to shifts in investor sentiment. However, both the sovereign and private sectors have shown resilience in securing external financing, demonstrating their capacity to navigate financial challenges and maintain access to international capital markets.



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