Turkey is No Turkey
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Brand Turkey is working on its image abroad and struggling to overcome several centuries of bad press amongst all its neighbors. It hasn't helped that Greeks, Armenians, Lebanese, and other diasporas have had several decades to get their side of events out in the West and either establish blame or take credit for a number of Turkish accomplishments. Hopefully by the time New York-based Chobani and its "Greek" yogurt goes public, maybe CEO Hamdi Ulukaya and his team will feel empowered enough to embrace their Ottoman heritage and reclaim the Turkic word yoğurt. Still, the marketing hedge is understandable since the phrase "Turkish yogurt" tends to conjure up unappetizing images of meat milkshakes for most Americans unfamiliar with the region's cuisine.
As for investor prejudice, it can be misleading to think there is something wrong with Turkey since it only has one company – Turkcell (NYSE: TKC) – listed on an American exchange. When the mobile operator began transforming itself into a leading communications and technology company, global perceptions of Turkey hovered somewhere between indifference and hostility. The European Union had just begun to lay out the specific criteria necessary for Turkey's membership into the then-promising organization. In 2000, Turkcell became the first (and to date only) Turkish company to list with the New York Stock Exchange, and has grown to be in the top quintile of the NYSE by market cap. Turkcell credits the eleven year partnership with the NYSE for, "providing the global visibility and liquidity," they needed to, "deploy innovative communications infrastructure and advanced services that meet evolving customer needs across our 9 countries of operation." Last year the Turkish American Society honored Turkcell and NYSE Euronext (NYSE: NYX) for, "their roles in sustaining a long-term relationship between Turkey and the United States." Moreover, Turkcell's recent ownership dispute has helped to illustrate Turkey's ascension into the ranks of advanced market economies ruled by lawyers (if not law).
As anyone ever involved in a foreign IPO knows, the New York Stock Exchange regularly trots out its successful partnership with Turkcell to foreign companies looking to list in America. The exchange's failure to lure more Turkish corporations (several of which have multi-billion dollar market caps) is more telling about the NYSE Euronext's sales team than Turkey's corporate desires. While Turkcell demonstrated Istanbul's ability to field multinational corporations that meet global standards, it also helped Turkish interests build confidence in their own domestic experiences. Today, Turkish companies aren't in desperate need of a third party's stamp of legitimacy or stability that has continued to prove so enticing to Chinese interests that have invaded the NYSE's rival exchange and kept the NASDAQ OMX Group (NASDAQ: NDAQ) happy. However, while the NASDAQ industrial-complex has yet to attract a single listing from the extensive lands of the foreign Ottoman Empire, the NYSE Euronext boasts six Turkey-themed investment funds collectively representing over a billion dollars. With success like the tripling of assets under management by iShares' MSCI Turkey Investable Market Index Fund (NYSEMKT: TUR), it may not be long before the term "turkey" is redefined for investors looking for the new vanilla. (After all, if one of the world's most exotic spices – second only to saffron in price – can become shorthand for 'normal', then it is not hard to envision Turkey, the G-20's second fastest growing economy, creating a similar shift in the public consciousness.)
The Istanbul Stock Exchange is one to watch with its 300-plus listings, almost a quarter trillion dollar market cap, and trading value ratios similar to American and Korean exchanges (rather than South African, Russian, or Indian ones). While the ISE has affiliated with all the relevant global agencies and associations, it has stayed independent of the larger global exchanges and charted its own bourse. In addition to entering the Turkish derivatives market, the ISE has been building its own global network by buying into small exchanges that are likely to grow rapidly by decade's end, such as the ones in Azerbaijan, Bosnia, and Kyrgyzstan. Meanwhile, as the majority of other emerging markets' big companies rush to list outside their countries, the ISE has been the first stop of choice for every major corporation in Turkey. Considering Turkey has consistently ranked as one of the fastest growing (not to mention most stable) economies in the world, and that it continues to climb the ranks of foreign direct investment (in addition to increasing domestic re-investment), the ISE is looking good.
Unfortunatley, a major obstacle for Americans wanting to invest in Turkey is that services like Charles Schwab (NYSE: SCHW), which currently has the most extensive international support system for the average investor, do not facilitate trades for Istanbul Stock Exchange listings. (However, Schwab does facilitate ease of investment into Thailand, a decent market that is in many ways a Southeast Asian analog to Turkey, yet still pales in comparison in every way – including investor safeguards.) Unlike China (or even Israel) which have a number of listings on US exchanges, Turkish businesses have little need to jet off to Frankfurt, London, or New York to go public as the country's own capital markets, regulations, and reputation have so far proven sufficient. It is also telling that the recent recession did not require Turkey to bail out its banks. (There’s still hope for a responsible credit-obsessed global consumer society yet).
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