The Turkish corporate sector has been able to handle the economic turmoil well, investment bank Jefferies has said in a recent report that suggests it is in much better shape to manage any shock adjustment.
Turkiye has defied the financial markets’ pessimistic consequences over the past five years despite the disparities within its balance of payments, it said, adding that the country’s stock market has outperformed its Emerging Markets peers in the U.S. dollar terms year-to-date despite rising fuel costs and a strong dollar.
“The index itself has flat-lined in U.S. dollar terms for the past five years confounding the skeptics who had felt the economy was overdue a balance of payment crisis. Turkiye has seemed to always have skirted around the ‘inevitable adjustment.’”
The top 20 listed companies demonstrated a substantial improvement in return on equity (ROE) since 2015, and although they raised leverage ratios, net profit margins expanded despite asset turnover being mixed, Jefferies analysts noted.
“Net debt-to-equity was comfortable in general,” they said. “The bottom line is that with CDS widening to the 2008 levels, another currency stress test is appearing. It might not be time to dip the investment finger in just yet, but Turkish companies have not only shown adaptability but also a survivorship bias.”
Turkish companies are “very flexible,”and decision-making mechanisms at local firms work fast, said Çetin Tecdecioğlu from the Turkish Exporters’ Assembly (TİM).
“That means Turkish companies grow or downsize very quickly, which is a distinctive feature,” he said, adding that the key to weathering the economic challenges is access to financing.
Tecdecioğlu stressed that the stagnation risk in the global economy is looming. “Next year, it is more likely that companies will reduce their capacities and may not be very profitable. But companies and their executives appear to be ready to face those challenges, provided that they have access to financing,” he said.