Sell-off of Turkish stocks continues for fourth consecutive week

By bne IntelliNews June 2, 2016

Foreign investors continued to sell Turkish stocks last week as they remain wary of the rising political pressure on the central bank following the recent the cabinet reshuffle.

There was an outflow of $65.5mn from Turkey’s equity market last week, data of the central bank showed on June 2. That followed an outflow of $636mn over the previous three weeks. The central bank, however, said the bond market saw a tiny inflow of $0.3mn in the week ending May 27, adding to $434mn inflows in the preceding two weeks.

Investors cheered the reappointment of market-friendly deputy premier Mehmet Simsek, but although he survived the latest cabinet reshuffle, the ex-investment banker now looks less powerful than before as his economic portfolio has shrunk. Investors are also concerned about the rising political pressure on the central bank to further cut interest rates to boost the economy.

At its latest rate setting meeting on May 24, the first one since the new governmetn took power, the central bank decided to cut the overnight lending rate by 50bps to 9.55

Morgan Stanley said in a recent report that fixed income investors in London maintain a broadly neutral stance on Turkish assets despite recent unexpected political developments. The bank cites four reasons why investors are not changing their positions: “Turkey is still performing relatively better compared to most of its peers in terms of macro indicators; Mehmet Simsek's continuation as Deputy PM is a signal that there should not be major changes in monetary and fiscal policy in the foreseeable future; locals' FX sales during volatile times proved to be an effective anchor against excessive TRY depreciation; and the base scenario in politics is a public referendum and it is mostly not seen as a game-changer.”

However, investors told Morgan Stanley that they could change their views and positions to negative if they see an ongoing rise in energy prices, political developments increasing the chance of early elections, a further deterioration in the tourism sector, increasing efforts to restructure loans -signalling rising problems in the real sector amid a combination of repercussions of currency depreciation and declining sales- and the central bank's ongoing easing cycle and its inability to respond effectively and timely when conditions turn more negative in the future.

NON-RESIDENTS' HOLDINGS OF EQUITY AND GOVERNMENT DOMESTIC DEBT SECURITIES ($ mn)
(Market Value) 27/05/16 20/05/16 13/05/16 06/05/16 29/04/16 22/04/16 15/04/16 08/04/16 01/04/16
STOCK                  
         EQUITY  43,541.6 42,311.2 43,521.9 44,114.5 50,278.3 50,352.3 49,426.1 47,455.4 48,286.0
         GDDS  (*) 35,019.3 34,277.7 34,690.3 34,751.5 36,868.1 36,876.5 35,725.8 34,618.6 34,858.6
            Repo 4,061.4 4,152.5 4,257.7 4,247.5 4,478.4 4,572.4 4,799.3 4,730.3 4,734.4
         Private Sector 952.6 1,000.2 1,006.1 1,009.6 1,008.7 1,008.1 992.4 1,011.8 1,016.2
NET TRANSACTONS (Adjusted for Foreign Exchange and Market Price Effects)    
         EQUITY -65.5 -163.6 -174.3 -298.3 10.1 84.4 335.5 -64.8 191.2
         GDDS (*) 0.3 166.1 268.3 -182.6 -81.7 176.5 878.6 -4.5 -209.4
             Repo -175.7 -38.7 48.0 -22.0 -105.7 -334.7 54.9 25.5 -206.5
         Private Sector -47.6 -5.9 -2.6 0.9 0.6 15.7 -19.3 -4.5 32.4
source: tcmb

Related Articles

World Bank forecasts a 0.4% y/y decline in Belarus's GDP for 2017

The Belarusian economy will decline by 0.4% year-on-year in 2017, followed by a modest growth of 0.7% in 2018 and 1.2% in 2019, the World Bank forecasts in its Belarus Economic Update published on ... more

EIB and Belarus sign Framework Cooperation Agreement

The European Investment Bank (EIB) and Belarus inked the Framework Agreement on Cooperation on May 15, which paves the way for the lender to invest up to €200mn in Belarusian projects, the Foreign ... more

Ex-owners of Ukraine's PrivatBank fail to restructure loan portfolio, central bank says

Former owners of Ukraine's biggest state lender PrivatBank, which was nationalised in December, Ihor Kolomoisky and Hennady Bogolyubov, failed to demonstrate progress in the fulfillment of its ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss