What Türkiye must do to become a home for global capital

Türkiye’s capital markets have transformed significantly over the last few years, marked by record-breaking initial public offerings (IPOs), a surge in retail investor participation, and growing societal interest in investing. However, despite these developments, the country has yet to emerge as a preferred destination for global capital. Institutional investors, such as large pension funds, insurance firms, sovereign wealth funds and others, continue to allocate only a limited portion of their portfolios to Türkiye, raising critical questions about the underlying factors that deter foreign investment. The disparity between Türkiye’s domestic market performance and its global standing is rooted in broader structural issues rather than individual company risks. While many Turkish firms demonstrate superior growth potential, export capabilities, operational efficiency and profitability compared to their emerging-market peers, they often trade at substantial valuation discounts relative to similar firms abroad. These discrepancies are not due to specific company-level risks, but rather to systemic market risks. Investors evaluate not just businesses, but the entire regulatory environment, institutional strength, and the predictability of legal frameworks. A fundamental principle of financial theory underscores that the cost of capital is influenced not only by corporate performance but also by the level of perceived uncertainty. Stronger corporate governance, consistent regulatory policies, and robust protections for investor rights reduce the risk premium associated with investing in a given market. As the risk premium decreases, the cost of capital for local firms drops, leading to higher valuations and increased investment activity. Therefore, capital market reforms extend beyond mere changes to stock exchanges, they directly impact the trajectory of national economic growth. In recent years, financial hubs such as the Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM), and Saudi Arabia’s capital markets have successfully attracted global capital through comprehensive reforms. Their success stems from predictable regulations, resilient institutions, investor-friendly practices, and long-term strategies aimed at attracting sustained investment. Capital flows toward markets that offer reliability and transparency, even before considering potential returns. For Türkiye, aligning its capital market regulations with those of the world’s most advanced markets represents a crucial priority. This includes adopting IPO standards, enhancing public disclosure requirements, reinforcing corporate governance principles, and improving enforcement mechanisms. Regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) and the U.K. Financial Conduct Authority (FCA) serve as benchmarks for best practices in financial oversight. By continuously updating legislation to reflect international standards, Türkiye could position itself as a more attractive option for global investors. However, legislative improvements alone are insufficient. The effectiveness of capital markets hinges on the quality of the institutions that govern them. The ability of regulatory bodies to attract and retain top-tier professionals is a key determinant of their efficacy. Institutions like the SEC, FCA, and the Monetary Authority of Singapore benefit from high-caliber experts who contribute to maintaining market integrity and fostering investor confidence. Similarly, strengthening the recruitment and retention of skilled professionals within Türkiye’s Capital Markets Board (SPK) would enhance the institution’s credibility and attractiveness. To ensure long-term success, Türkiye must create an environment where its brightest graduates view the SPK as a desirable career path. This requires not only competitive salaries and clear career progression opportunities but also a commitment to professionalism and excellence. By investing in the human capital of its regulatory agencies, Türkiye can lay the foundation for a more dynamic and globally integrated capital market. As the competition among emerging economies intensifies, Türkiye faces increasing pressure to prove that its markets are not only viable but also reliable. With rivals such as India, Saudi Arabia, the United Arab Emirates, and Singapore already making strides in attracting global capital, the need for reform has never been greater. The path forward demands a combination of regulatory modernization, institutional strengthening, and a renewed focus on building trust among international investors.