Unrealised potential

Greece & Turkey

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The eastern Mediterranean is a disparate region; the principal economies in that part of the world, Greece and Turkey, have seemingly far more to divide them than to unite them. Their common link is the European Union: Turkey appears to be following a path towards EU membership similar to that trod by Greece and investors are eager to gain from convergence within the region.

But investors face tough challenges in gaining non-government fixed-income exposure to Greece and Turkey through the bond and derivatives markets: the vast majority of issuance from both countries is sovereign. Accordingly, there is no credit default swap market other than that for the sovereign credit. And there have been only a handful of locally originated collateralised debt obligations.

Bankers are not optimistic about any significant increase in corporate issuance from Greece - it is, after all, a country of just over 10 million people with a limited number of large companies. But Turkey is viewed as a potentially substantial market: it has a population of 70 million and a diverse, rapidly growing and increasingly sophisticated corporate sector.

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