Turkey’s Capital Markets Show Resilience as Investors Eye a Stronger Recovery Ahead

Türkiye Capital Markets Association (TSPB) Chairman Pamir Karagöz has described 2025 as a year marked by heightened geopolitical risks, weaker global growth expectations, and rising uncertainty worldwide. Despite this challenging international backdrop, Karagöz emphasized that Turkey’s capital markets demonstrated notable resilience, supported by disciplined domestic economic policies and a growing investor base.

According to Karagöz, while global markets struggled with volatility and fragile confidence, Turkey managed to navigate the year more effectively. He attributed this relative stability to tight monetary policies, which helped contain risks and reinforced confidence in financial markets. In his assessment, 2025 became a year that highlighted not only the durability of Turkey’s capital markets but also their capacity to adapt and transform under pressure.

Capital Markets Provide Billions in Funding to the Real Economy

One of the most striking indicators of this resilience has been the continued flow of funding from capital markets to companies. Karagöz noted that since 2021, firms have raised close to $10 billion through initial public offerings (IPOs). This sustained activity, even amid global uncertainty, underscores the growing role of equity markets as a financing channel for Turkish companies.

Debt markets have also expanded significantly. Between 2020 and 2025, real sector companies issued nearly 1,500 debt instruments, securing a total of $18.9 billion in funding. By 2025, the number of real sector firms issuing debt instruments had reached 73. These figures, Karagöz stressed, clearly demonstrate that capital markets are becoming an increasingly vital source of financing for the real economy, reducing reliance on traditional bank lending.

Expectations for Interest Rate Cuts and Rising Investor Interest

Looking ahead, Karagöz shared his outlook for the coming period, pointing to a more supportive environment for capital markets. He expects the Central Bank of the Republic of Turkey (CBRT) to continue with interest rate cuts, a move that could reignite domestic investor interest in capital market instruments.

“Parallel to interest rate reductions, we anticipate that local investors’ appetite for capital markets will begin to rise again,” Karagöz said. He also highlighted expectations for a broader recovery in global financial markets, particularly regarding risk appetite toward emerging economies.

As global risk sentiment improves, Karagöz anticipates an acceleration in foreign investor inflows. He added that potential upgrades in Turkey’s credit rating could further strengthen interest in Turkish lira-denominated assets, supporting renewed momentum in IPO activity and continued growth in the investment fund market.

Historical Trends Point to Positive Equity Performance

Drawing on historical data, Karagöz explained that equity markets have typically performed positively during periods of interest rate cuts. This pattern, he said, provides a constructive signal for the outlook of Turkish equities in the coming years.

“If current economic policies are maintained in a stable and consistent manner, we believe our markets could enter a favorable phase in 2026,” Karagöz noted. He also highlighted structural shifts within the market, forecasting a larger role for technology companies, green finance instruments, and ESG-based investments.

According to Karagöz, Turkey is entering a period in which artificial intelligence, blockchain technologies, and digital assets will become integral components of the financial ecosystem. These developments, he argued, will not only diversify investment opportunities but also deepen the sophistication of capital markets.

Investor Base and Asset Growth Reach Record Levels

Karagöz also shared key data reflecting the expanding investor base. By the end of last year, the total number of investors holding equity balances reached 6.5 million. The total value of equity holdings surged 31% year-on-year, reaching 7.5 trillion Turkish lira. This growth highlights the increasing participation of individual investors and the rising importance of equities as a long-term investment vehicle.

In parallel, the number of domestic individual investors in investment funds managed by portfolio management companies reached 5.4 million by the end of 2025. As of November 2025, the combined portfolio size of investment funds, pension funds, and individually managed portfolios exceeded 11.6 trillion lira.

“This picture shows that investors view professional portfolio management as a reliable alternative under current conditions,” Karagöz said, emphasizing the growing trust in institutional asset management.

Foreign Capital Flows Show Signs of Recovery

International data further supports a cautiously optimistic outlook. According to figures from the Institute of International Finance (IIF), foreign portfolio flows into emerging markets rebounded significantly in December. Bond markets led the recovery with $29.4 billion in inflows, while equity markets recorded $7.3 billion in net inflows after sharp outflows in November.

For Turkey specifically, December saw $819 million in foreign inflows into equities and $1.18 billion into bonds. This marked a clear turnaround compared with November, when equities experienced a $60 million outflow while bonds attracted $204 million in inflows.