The appetite for Turkish and lira-linked assets from yield-hungry Japanese retail investors has grown by leaps and bounds since the start of the year. From just $136m in 2010, lira-denominated Uridashi bond issuance – as foreign-currency debt sold to Japanese retail investors is called – reached nearly $2bn in the first six months of this year.
And all this could be just the tip of the iceberg, according to analysts at Barclays.
At the moment, the bank pegs Japanese investors’ total exposure to Turkey at no more than $8bn, or just 1.2 per cent of their emerging market portfolio investment. To put this into context, at the peak of their enthusiasm for Brazil, Mrs Watanabe and her ilk poured some $102.9bn into real-denominated holdings of Toshin, or investment trust, funds.
But with yields on Turkish bonds among the highest in emerging markets – almost 8 per cent for one-year bonds – and the lira up more than 20 per cent against the yen since the start of 2011, Barclays reckons that inflows can hit $5bn-$6bn a year.
For Turkey, this would be the equivalent of 0.8 per cent of the country’s GDP, or about 46 per cent of last year’s total portfolio inflows into the country.
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