Turkish markets have been threatened by the political power struggle between prime minister Recep Tayyip Erdogan and influential Muslim leader Fettullah Gulen since the fraud probe initiated on the 17th December 2013 against the government officials. Both parties blame each other for corruption and creating a parallel state within the government bodies. Furthermore, the upcoming local elections that will take place on the 30th March 2014 have raised the political tension and negatively affected the financial sector.
It is understandable that foreign investors are wary, and trying to understand the situation going on in Turkey. If the instability continues it may be expected that a number of the investors will hold or cancel their prospective investment projects in Turkey.
As a result of the political tension and rising investor concern, the Central Bank of the Republic of Turkey recently increased all interest rates. Finance minister Mehmet Simsek said that this move by the central bank has significantly dispelled investors’ concerns. He also added that the interest rate increase stemmed a currency sell-off and anchor inflation expectations.
However, although the political situation is intense, Islamic finance investments are still taking place in Turkey. Turkish real estate investment trust Kiler GYO announced that it is planning to issue a five-year Sukuk worth at least US$100 million within the second half of 2014. Kiler GYO is in contact with the banks from Saudi Arabia and Qatar with regards to buying the Sukuk certificates. This issuance will be used for new investments and extending the maturity of existing loans. Kiler Holding’s chief financial officer, Kaan Aytogu, stated that Sukuk issuance will be based on the Istanbul Sapphire Tower’s sale and rental income.
In early February Kiler Holding’s subsidiary, Turkish food retailer Kiler Alisveris, signed a US$120 million four-year loan deal, which included a Shariah compliant borrowing component, with Bank of America, Merrill Lynch and banks from the Gulf region. Additionally, another real investment trust, Is GYO, also announced that it has decided to issue up to US$91 million in bonds or similar debt instruments to qualified investors on the domestic market.
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
[email protected]
.