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Note: Huseyin Erkan is chairman and chief executive of the Istanbul Stock Exchange and one of the main proponents of a deepening of Turkey's capital markets. The potential for new securities, markets and issuers is there but many bridges need to be crossed. Erkan speaks to Nick Lord.
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"Only 12% of the top 1,000 companies are listed on the exchange, so the potential is extremely large"
Huseyin Erkan, Istanbul Stock Exchange Are you happy with the increased momentum in the IPO market?
We are. In the years between 2001 and 2009 the average number of IPOs went down to about five a year. Last year we had a big conference in May that brought 600 companies together and since then the momentum has really grown. Last year up to May we had only four companies making public offerings. In 2010 after May, an additional 18 companies came to market. Since the beginning of 2011 five companies have come to market.
How about wider capital market developments?
Companies have done a carry trade over the years. They have borrowed abroad and invested in Turkey. They borrowed for 10 years from outside, then brought the foreign exchange into the country, invested it and paid it back with the profits. It has been extremely profitable. The government's need for credit has now gone down and that leaves a lot of room [for corporates] in the domestic capital markets. They are issuing lira bonds for the first time. They are going public and raising funds from investors who, because debt yields are so low, see this as the only way to make money.
One of the criticisms is that the wrong companies came to market and were then badly priced. The performance of these IPOs has not kept up with the performance of the wider index.
It is not the wrong companies, it's the...