Is Türkiye’s Stock Market Story Turning Into a Nightmare?
By Bosphorus News Economy Desk
Türkiye's economic management, already under pressure from high inflation and high interest rates, is facing a new problem in the stock market.
The ruling AKP's capital-market push was meant to pull household savings into productive investment, give companies a funding channel beyond costly bank loans and reduce dependence on foreign currency, gold, crypto assets and real estate. That promise is now running into a harder reality: the market has failed to deliver convincing returns for millions of small investors.
Expanding Borsa Istanbul has been a central part of the policy. Capital Markets Board, or SPK, Chairman İbrahim Ömer Gönül said in December 2025 that 204 companies had gone public since 2020, raising 222 billion liras from the market. He also said one third of the companies traded on the exchange had been listed over the previous six years.
The initial public offering, or IPO, pipeline continued into 2026. Fourteen companies went public on Borsa Istanbul in the first quarter of the year, compared with 18 IPOs in all of 2025. The number of companies on the exchange has also kept rising, although different datasets use different classifications for listed firms and actively traded shares.
The policy logic was straightforward. Citizens were encouraged to hold equities instead of foreign currency, gold, crypto assets and housing. Companies facing expensive credit were expected to raise capital through the stock market. A deeper equity market was supposed to ease pressure on the banking system and turn household savings into corporate financing.
That story has weakened.
The number of investors, which once reached around 10 million during the IPO boom, has fallen sharply. Foreign investors have also remained cautious toward Borsa Istanbul. Market professionals point to political uncertainty, high volatility, doubts over reserve quality and mistrust in the justice system as persistent barriers to stronger foreign participation.
Foreign capital has shown more appetite for carry trade, a strategy in which investors use lower-yielding currencies or funding sources to enter higher-yielding local assets. In Türkiye's case, that means coming for lira returns driven by high interest rates rather than making a longer-term commitment to equities.
The cost of that strategy is growing. High interest rates have helped the authorities rebuild reserves and defend the lira, but they also increase the Treasury's debt-service burden. They raise corporate financing costs at the same time, feeding into stagnation risks, bankruptcies and job losses.
The labour market already shows that pressure. According to the Turkish Statistical Institute, or TÜİK, the narrow unemployment rate fell to 8.1 percent in March 2026, while the broader underutilised labour rate rose to 31.5 percent, matching a record level. The headline unemployment figure therefore hides a much weaker labour picture beneath the surface.
The ruling AKP wanted the stock market to give companies an alternative financing route while interest rates remained high. That channel is now showing visible stress.
Kontrolmatik Teknoloji, which went public in 2020, defaulted on two lira bonds that matured on May 15, according to Bloomberg. The missed payments covered two floating-rate instruments with a combined value of 450 million liras. Borlease Otomotiv, listed in 2023, had already warned in March that it could not meet principal and coupon payments on a bond.
These defaults do not yet amount to a systemic breakdown. They do, however, expose a more serious weakness in the IPO cycle. Many newly listed or recently expanded companies entered the market during a period of strong retail appetite, heavy domestic liquidity and official encouragement. The macroeconomic environment has since changed. Financing is expensive, domestic demand is weaker, inflation continues to erode real returns and small investors are less willing to carry losses indefinitely.
The sector split is becoming harder to ignore. Defence and energy stocks continue to attract attention because they are tied to state priorities, export potential and major infrastructure narratives. Many other sectors have failed to offer the same protection. For millions of smaller investors, nominal gains mean little when inflation erodes real wealth.
The response from economic management has been to keep the IPO channel open. At least 100 companies are said to be waiting for public offering approval at the SPK, according to market professionals and IPO trackers. That may help companies searching for capital, but it also raises a credibility problem for the market itself.
A stock exchange cannot become a durable savings channel if investors begin to see IPOs as a transfer mechanism rather than a wealth-building opportunity. The more weak companies come to market, the greater the risk that the IPO story becomes associated with losses, defaults and balance-sheet stress.
The political risk is clear. If Borsa Istanbul continues to disappoint, households may move more aggressively back toward traditional stores of value. More demand for foreign currency and gold is exactly the shift the economic management wants to avoid. Türkiye is already believed to hold hundreds of billions of dollars' worth of gold outside the formal financial system, often described as "under the mattress." The weaker the stock-market story becomes, the harder it will be to bring those savings into the real economy.