* Many Asian banks, sovereign funds seeking Turkey assets
* ICBC was interested in Alternatifbank stake -sources
* Infrastructure is major opportunity
* Turkey looking to diversify funding sources
* Europe's debt crisis may support trend
By Dinesh Nair and Asli Kandemir
ISTANBUL, Feb 20 When Turkish conglomerate
Anadolu Holding put its 75-percent stake in Alternatifbank
up for sale last year, a distant potential suitor
took a close look at the business, eyeing an entry into Europe's
The possible buyer was Industrial & Commercial Bank of China
(ICBC), the world's largest bank by market value,
according to industry sources familiar with the matter.
Although ICBC did not in the end get its hands on the stake,
partly because it entered the process late, the lender has not
shut its eyes to Turkey's banking sector and may look at future
asset sales there, the sources said, speaking on condition of
anonymity as the matter has not been made public.
ICBC declined to comment for this article. Alternatifbank is
now in talks with Commercial Bank of Qatar on the
stake sale, and the Qatari lender expects to complete the
purchase by the end of March.
But the Chinese bank's interest underlines growing appetite
among Asian investors for Turkish assets. They are lured by the
country's strong economic growth, stable politics and a
regulatory system which shepherded Turkey's banks safely through
the global financial crisis.
When the government raised $2.5 billion from a 24-percent
stake sale in Halkbank last year, in its biggest
share sale ever, Singaporean investors accounted for 9 percent
of the allocation, with sovereign wealth fund Temasek and
Government of Singapore Investment Corp picking up stakes.
"I think the Turkey story is a pretty obvious one for global
investors. Already Gulf investors are deploying their money
here, and we are now seeing the trend trickling to Asians," said
Elif Bilgi, Turkey country executive and co-head of emerging
markets investment banking at Bank of America Merrill Lynch.
"They are looking at the banking system, infrastructure
opportunities and also portfolio investments into the stock and
fixed income markets."
Interest in Turkey among Middle Eastern investors has been
rising for several years. The appetite among more distant Asians
is more recent, and an encouraging sign for a country which is
in need of foreign capital.
"The Asians are real buyers. They can deploy $5-$10 billion
in a single deal if they want to. That is where we see deal
flows in the future," said an investment banker who handles
financial industry activity at a global bank.
Bank of Tokyo-Mitsubishi, Japan's largest bank by
assets, has applied for a banking licence in Turkey. Another
Japanese lender, Mizuho Corporate Bank, opened a representative
office in Istanbul in June last year.
Asia's interest in Turkey is not confined to the country's
banking system but widely spread across sectors including
infrastructure, tourism and logistics.
One of the most prolific Asian investors in the country is
Malaysian state firm Khazanah Nasional. A unit of the
company, which has an investment portfolio worth around $40
billion, was involved in the largest private equity deal in
Turkey last year when it bought a majority stake in the
country's largest hospital chain, Acibadem, from Abraaj Group.
The deal was valued at over $2 billion.
Another Khazanah Nasional unit, UEM Group, is part of a
consortium which won a tender for the privatisation of Turkey's
toll roads and bridges with a bid of $5.72 billion last year, in
the largest privatisation deal in the country.
Turkey has an active privatisation programme planned for
this year, and more Asian investors specialising in power,
energy and infrastructure are expected to enter.
"We are constantly receiving calls from our colleagues in
Asia asking for potential opportunities for clients in Turkey,"
said Selim Kervanci, HSBC's head of global banking for the
country. "Some of the large Asian investors have identified
Turkey as the top emerging market destination they need to
Shangri-La Hotels and Resorts, one of Asia's leading luxury
hotel groups, has signed an agreement with a local family group
to build its first hotel in Istanbul.
"In the last decade, Asian companies' foreign investments In
Turkey jumped by 57 times," said Samet Inanir, strategy and
business development counsellor at the Foreign Economic
Relations Board, a business organisation in the country.
"These companies went to developed markets first to catch up
and invested in low-hanging fruit," he said. Now they are
turning to Turkey and other emerging markets "because on the one
hand their investment capacity has increased and on the other,
real growth is in those markets."
Turkey badly needs foreign capital to cover its large
deficit in trade of goods and services. Traditionally it has
relied on Europe for the vast majority of that capital, but the
European debt crisis has underlined the risks of such
"Turkey is in need of external capital. The country has been
so far relying on the West, mainly Europe, for its needs, but
seeking to diversify funding sources with a focus on Asia is an
extremely positive move," Kervanci said.
The diversification is still in its very early stages;
Europe provided $12.4 billion of the $15.9 billion of foreign
direct investment in Turkey during 2011, according to the most
recent data from the Turkish government. Asian countries outside
the Middle East provided just $505 million.
Nevertheless, a rebalancing of trading patterns appears to
be underway, which could encourage a shift of investment. In
2000, European Union countries took 56 percent of Turkish
exports, according to HSBC; the ratio fell to 39 percent in
2012, while Turkish exports to Asia increased from 5 percent to
7 percent over that period.
"To attract more Asian investments to our country, Turkey
should improve its logistics infrastructure. If we can manage to
send goods to Europe, the Middle East and Middle Asia faster and
cheaper, the volume of investments will increase," Inanir said.
Burak Tansan, partner and managing director of the Boston
Consulting Group in Istanbul, said last year's upgrade of
Turkey's credit rating by Fitch Ratings, and financial incentive
schemes introduced by the government last year, would help it
attract more Asian money.