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July 29, 2016updated 05 Jun 2017 10:03am

Turks & Coups: How Turkey’s attempted coup affects HNWIs

A recent report from WealthInsight has shown that Turkey now has a high net worth (HNW) community of 96,768 individuals. If compared to other markets in the Middle East, Turkey has 17,500 more HNWIs than its nearest rival, Israel. So how does the 15th July coup attempt by factions of the Turkish military affect the country's HNWIs, their wallets, confidence, businesses and, subsequently, Turkey’s private banking sector?

By Oliver Williams

A recent report from WealthInsight has shown that Turkey now has a high net worth (HNW) community of 96,768 individuals. If compared to other markets in the Middle East, Turkey has 17,500 more HNWIs than its nearest rival, Israel. So how does the 15th July coup attempt by factions of the Turkish military affect the country's HNWIs, their wallets, confidence, businesses and, subsequently, Turkey’s private banking sector? Oliver Williams, head of WealthInsight, digs into the details.

 

A timely report from WealthInsight has shown that Turkey now has a high net worth (HNW) community of 96,768 individuals. If compared to other markets in the Middle East, Turkey has 17,500 more HNWIs than its nearest rival, Israel. With the land between them mired in civil war and its borders awash with refugees, while their Gulf neighbours fret about the oil price, Turkey would seem like a prosperous place for private banking in the Middle East.

So what of 15th July coup attempt by factions of the Turkish military? With 58% of Turkey’s HNWI community resident in Istanbul, they cannot have failed to have noticed the tanks on the Bosporus, riots by the coup’s opposers and the sporadic gunfire that resounded throughout the city’s ancient streets. The question here is how will it affect HNWIs, their wallets, confidence, businesses and, subsequently, Turkey’s private banking sector?

Collectively, the wealth of Turkey’s HNWIs stands at $58.1bn. The majority of this is first generation wealth, earned through Istanbul and, to a lesser extent, Ankara’s thriving economies. Since the coup’s target, the now president and former Prime Minister Recep Tayyip Erdo?an, has been the de facto ruler of the country since 2003, roughly a third of Turkish HNWIs (36,303 to be exact) have made their wealth under his rule and would be likely to support his premiership.

If evidence were needed of this, the echelons of Turkey’s HNWI community have already spoken of their opposition to the coup. Consider Aydin Dogan, with a net worth estimated by WealthInsight at $1.28bn, he is the founder and controlling shareholder (alongside his daughter Arzuhan Dogan Yalçindag) of Dogan Holding Group, one of the countries media groups. Speaking out against the coup, Dogan recently called it a ‘heinous attack on democracy’. Murat Ulker, chairman of the FMCG group Yildiz Holding and worth an estimated 4.2 billion, joined in the chorus, calling the coup a ‘treacherous attempt on our lives’.

Ingrained in their messages is an attempt to keep Turkey’s economy functioning as usual. Abraaj Group, one of the region’s largest private equity funds with offices in Istanbul, is preparing to spend about $500million on acquiring stakes in five Turkish companies, including a 10% stake in Fibabanka AS, a private bank controlled by another Turkish billionaire, Hüsnü Özye?in (worth $3.2bn by WealthInsight estimates).

Turkey’s restored relations with Israel (soured in 2010 when the latter attacked Turkey’s aid convoy to Gaza) and Russia (which imposed economic sanction on Turkey after it shot down a Russian jet last year), may yet produce further business deals on the international stage. 

However, that’s not to say that this nouveau-riche community will support Erdo?an’s post-coup purge of media and military. Just as this article went to press, four executives of Turkish firms were arrested for backing the supposed coup organiser, Fethullah Gulen, the first such arrests within the business community. The executives were from two family run firms – Boydak Holding company and Sonmez Holding company – both diversified businesses and typical of the multi-sectored businesses that make up the source of wealth for 34.7% of Turkish HNWIs.

The knock-on effects of these arrests and the others that are likely to follow remains to be seen, but for many of Turkey’s wealthy, the outlook was gloomy even before the coup transfixed the country. Recent terrorist attacks have left the tourist industry on its knees, in turn affecting the luxury goods sector, many of whose buyers originate from the Gulf and Europe. The number of HNWIs in the country dropped 0.1% between 2014 and 2015 after a near 10 year growth streak.

Unfortunately for wealthy Turks, it is the other side of the geo-political sward that now strikes at their prosperity, not just the coup attempt. Once their greatest asset, Turkey’s unique Euro-Asian position, buttressing battles and cornering conflict, may now be its biggest headache. Keeping borders with an expansionist Russia, revived Iran and embattled Syria and Iraq is not good for business. The recent coup attempt and all that follows from the offices of Erdo?an will make things worse for a few, while not improving them for the majority.  

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