Inflation-driven IPO rise in Turkey shows signs of fatigue: report – Turkish Minute

The recent surge in Turkish investment in initial public offerings (IPOs), which has gained popularity in recent years due to high inflation, is starting to lose momentum as investors’ enthusiasm wanes in the face of less reliable stock gains, Bloomberg reported on Friday.

The country has emerged as one of the most prominent listing venues in Europe, the Middle East and Africa, with 56 companies completing IPOs this year, raising a total of approximately 79.8 billion lira ($2.7 billion).

While earlier IPOs this year saw impressive gains, with some rising as much as 61 percent in their first five trading days, recent listings have struggled to maintain their initial selling prices. The Borsa İstanbul IPO Index has witnessed a decline of over 20 percent from its peak in September.

“Appetite may start waning as multiple days of rallies in IPO stocks seem to be sputtering, which was the main thing that attracted locals to participate in the offerings. That said, such slowdowns happened before as well, so it’s yet to be seen if a similar trend will again be revived as the number of IPO participants retreats,” Burak İşyar, head of research at ICBC Turkey Investment, was quoted by Bloomberg as saying.

The surge in investing in newly listed shares gained popularity in recent years due to high inflation, which reached 62 percent in November, prompting ordinary citizens to turn to equity investing to safeguard their savings.

Since 2020, when local individual investors began flooding the equity market, the IPO Index has seen significant growth, particularly in the second half of 2022 and the third quarter of this year. Data from the Central Securities Depository of Turkey reveals that the number of equity investors more than doubled over the past year, reaching 8.6 million in December.

However, this trend is now showing signs of slowing down, exemplified by the recent debut of Avrupakent, which dropped on its first day of trading. Out of the seven IPOs completed this month, five are currently trading below their listing prices.

Despite the IPO Index’s 67 percent rise this year, outperforming the broader market, it is on track for its smallest annual gain since 2019. In contrast, Turkey’s main equity market benchmark, the Borsa Istanbul 100 Index, has recorded a 41 percent increase year-to-date.