Institutional Investors Eye Delights of Turkey

Terry Flanagan

More institutional investors now have better access to the fast-growing Turkish equities market, as banks and brokerages continue to open up routes into one of the world’s leading emerging markets.

Liquidnet, a buy-side focused block trading dark pool operator, which connects over 700 of the world’s top asset managers to equity trading opportunities across the globe, has begun offering its clients access to the Istanbul Stock Exchange (ISE).

“The Turkish economy has shown strong signs of growth despite global macro volatility, capturing the interest of portfolio managers globally,” said Per Lovén, head of corporate strategy for Liquidnet Europe. “As Turkey continues on its path to becoming a regional financial powerhouse, institutional investors looking to unlock value in Turkish growth companies will now be able to source large-scale liquidity in those equities, with minimal market impact, through our trading network.”

Last month, bulge bracket bank Citigroup announced that its customers could use its algorithmic trading products to gain direct market access to ISE. CA Cheuvreux, the French agency brokerage, has offered its clients something similar on ISE since late 2010, while Russian-based investment bank Renaissance Capital acquired Istanbul-based brokerage Mira Securities in December last year to better access the Turkish markets.

And in November year, ISE signed an agreement with Deutsche Börse, the German exchange, to co-operate on product development in a bid to develop closer ties with Frankfurt and boost its international presence.

Positive macroeconomic data and high growth rates are making Turkey one of the best performing of all the emerging markets this year, as the Middle Eastern nation, the 15th largest economy in the world, continues to separate itself from the nearby European sovereign debt crisis.

“Turkish equities are attractive from an investment perspective, and the addition of a new market to Liquidnet is welcomed as the ability to trade Turkish equities anonymously, in block size, is a favorable solution.” said Mandy Pike, global head of equity dealing at Aberdeen Asset Management.

Turkey, which is a candidate for European Union membership, although these negotiations are moving along slowly, is currently in the process of reforming its capital markets infrastructure and is merging its two main exchanges, ISE and TurkDex, the Izmir-based derivatives exchange, at the behest of the government in a bid to further develop Turkey as a regional financial hub. Turkey is also adopting some of the same legal definitions in MiFID that govern European financial regulation.

Liquidnet now operates equity trading in 40 countries following the move into Turkey. It recently added Indonesia and Malaysia to its growing emerging market network.

Meanwhile, last month ISE, in collaboration with Nasdaq OMX, the Brazilian bourse BM&FBovespa, the Johannesburg Stock Exchange and the Egyptian Exchange, announced a commitment to promote long-term, sustainable investment in their markets.

The exchanges, with over 4,600 traded companies in developed and emerging markets, have committed to work with investors, companies and regulators to promote long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on their exchange.

“We believe that stock exchanges have to play a vital role in encouraging the companies to apply environmental, social and governance practices to create a responsible investment environment where investors could reward sustainability sensitive companies,” said İbrahim Turhan, chairman and chief executive of ISE.

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