ANALYSIS-Turkey privatises, but poor markets could hurt price

By Emma Ross-Thomas

ISTANBUL, May 7 (Reuters) - Turkey is stepping up a long-delayed privatisation programme, pleasing investors spooked by political and economic woes, but the credit crunch may undermine how much Ankara can raise by selling state assets.

A bulging current account deficit, swelled by the price of oil, increases the need for foreign funds to finance the gap. As weak global markets are expected to slow foreign direct investment (FDI) into the private sector, EU-applicant Turkey is stepping into the breach with one of the most ambitious privatisation programmes in the emerging market region.

The prospect of weak markets reducing the amount Turkey can raise from privatisations would further threaten the financing of the current account gap, which investors watch closely as a major source of weakness for Turkish asset prices.

Analysts have generally welcomed the launch of new sales and the move has gone some way to improve market sentiment which has been knocked by a court case aimed at closing down the ruling AK Party, and by slowing economic growth and rising inflation.

But investors have already had a taste of how weak markets may affect valuations, with the heavily discounted pricing of a stock market listing for telecom operator Turk Telekom.

"I think it would count as a qualified positive," said Inan Demir, economist at Finansbank in Istanbul. "The overall commitment (to privatisation) is positive but I think Turkey would have got better prices ... in the absence of global turbulence."

Turk Telekom's initial public offering, due to hit the market on May 15, is being priced at a deep discount to other stocks and will raise a maximum 2.8 billion lira ($2.3 billion), well below a figure of 3.9 billion lira which Ankara budgeted for.

The government's decision to press ahead with the offering contrasts with moves at several private Turkish companies to postpone listings until better markets promise higher prices.