Turkish equities experienced an inflow of $252mn in the week ending June 16 as the benchmark BIST-100 tested a new record high of 100,001 on June 13, Turkey's central bank said on June 22.

The total equities inflow so far this year tops $2.22bn, in parallel with portfolio inflows to the emerging markets universe during this year to date.

Turkish government debt securities, meanwhile, saw an inflow of $756mn last week, data from the central bank showed. There has been an overall inflow of $3.37bn into the debt securities in the year so far.

Turkey's financial markets have performed well in the first half of this year. International investors have shown strong interest in Turkish assets despite the range of political and economic woes amid Turkey's extended and indefinite state of emergency.

Markets have given a positive reaction overall to the narrow Yes vote for an executive presidency in the April 16 referendum. However, concerns over the future economic and political outlook are still strong.

The Turkish lira had gained 0.38% d/d against the USD to trade at 3.5178 as of 14:30 local time on June 22 while the BIST-100 was up 0.24% to 99,631. The BIST-100 index was also up 27.5% on annual basis.

Better-than-expected macro indicators have supported the performance of Turkey's financial markets despite concerns over the accuracy of the statistics institute’s controversial revisions in its methodologies. However, a solid set of geopolitical risks, which now also includes the Qatar crisis, pose threats to the outlook.

Political uncertainties in the US over President Donald Trump’s future curbed expectations for offensive rate hikes by the Fed. Consequently, portfolio inflows to emerging markets escalated during recent months.

Borsa Istanbul has enjoyed overall capital inflows across this year so far. Markets, however, are suspicious that an unknown big fund trading with algorithms - “The Dude” as local traders refer to it - is behind the unexplained rally that has taken place since the beginning of 2016.

Meanwhile, in a pyschological ploy Borsa Istanbul is considering cutting the last two digits from BIST-100 index and is discussing the issue with local market participants, Himmet Karadag, head of the stock exchange, announced on June 20.

Borsa Istanbul last lopped two digits from its benchmark index at the beginning of 1997 when the index closed in on six figures. The rebasing triggered a 64% m/m jump in the BIST-100, with the index rising 254% y/y by the end of 1997.

Turkish stocks still trade at a discount of almost 30% to emerging-market peers, according to Bloomberg data.

End-2017 Turkish inflation expectations have risen from 9.53% in May to 9.55% in June. In April, Turkey’s central bank revised up its end-year inflation expectation for 2017 to 8.5% from its previous forecast of 8%.

The World Bank is forecasting a quickening of annual inflation to 9% at the end of 2017 from last year’s 8.5% while the OECD raised its 2017 CPI inflation forecast for Turkey to 10.4% in its June Economic Outlook forecast from its previous forecast of 7.7% given last November.

NON-RESIDENTS' HOLDINGS OF EQUITY AND GOVERNMENT DOMESTIC DEBT SECURITIES ($ mn)
(Market Value)	16/06/17	09/06/17	02/06/17	26/05/17	18/05/17	12/05/17	05/05/17
STOCK
EQUITY	47,838.00	47,013.70	47,068.60	45,869.70	44,587.70	44,560.40	43,895.00
GDDS (*)	31,221.60	30,118.70	30,272.00	29,802.90	29,228.70	28,651.80	28,570.80
Repo	2,745.90	2,781.00	2,735.80	2,709.50	2,319.80	2,315.00	2,338.50
Private Sector	911.7	881.4	886.1	872.9	890.7	887.8	884.7
NET TRANSACTIONS (Adjusted for Foreign Exchange and Market Price Effects)
EQUITY	252	-168.4	477.4	134.4	13.9	223.4	52.2
GDDS (*)	755.6	-88	114	472.3	490.8	263	-378.3
Repo	-69.8	43.7	0	387.5	1.3	-0.9	-15.2
Private Sector	30.3	-4.6	13.2	-17.8	2.9	3	1.9
source: tcmb