Foreign interest in Borsa Istanbul peaks in April, hits 1.5-year-high

Published 25.04.2017 23:06
A trader works in the Borsa Istanbul building. The foreign exchange rate on the Borsa Istanbul reached its highest level since November 2015 with a 65.2 percent in April.
A trader works in the Borsa Istanbul building. The foreign exchange rate on the Borsa Istanbul reached its highest level since November 2015 with a 65.2 percent in April.

While interest from foreign investors in the Borsa Istanbul stock exchange has reached its highest level in one-and-a-half years, the BIST 100 index peaked to an all-time high yesterday

The foreign exchange rate on Borsa, calculated from data published by the Central Registry Agency (CRA), reached its highest level since November 2015 with 65.2 percent in April. According to the information collected by Anadolu Agency (AA) from the Central Bank of the Republic of Turkey (CBRT), CRA and Borsa Istanbul, the share stocks of non-residents regarding monthly transactions stood at $41 billion and the net value of purchases made since the beginning of the year by foreign investors totaled $922 million.

The fact that foreign investors are on the net purchasing side this year, especially in the banking sector, has led to a 26-percent appreciation of bank shares on average with a high weight on the index since the beginning of the year.

Stock market gains 20 pct on average

The BIST 100 index, which has been on an upward trend since January under the leadership of shares from the banking sector, has surpassed 93,000 points for the first time since May 2013, bringing it to a new record of 94,332.89 points yesterday morning. Borsa Istanbul has brought an average of 20 percent to its investors since the beginning of the year.

The foreign exchange rate in Borsa has maintained a downward trend since seeing its historical peak of 72.5 percent in October 2007 and presented fluctuation within the 61-to-66 percent band range since 2012.

While the portfolio values of foreign investors continue to increase in terms of both nominal and market value, the decrease in the number of investors is also drawing attention. The number of foreign investor has fallen from 9,500 to 9,443 compared to the previous year, according to the latest data.

On a country-by-country basis, the U.S. ranked first with a portfolio value exceeding TL 58 billion ($16.14 billion), followed by the U.K. with TL 25.8 billion ($7.18 billion), Luxembourg with TL 12.1 billion ($3.37 billion), the Netherlands with TL 10.4 billion ($2.89 billion) and Qatar with TL 7.9 billion ($2.20 billion).

Gedik Yatırım Research Manager Üzeyir Doğan told AA that there is a very strong correlation between Borsa Istanbul and the foreign exchange rate, pointing out that even a one-point fluctuation in the share of foreign investors, which has not fallen below 61 percent in recent years, has an impact on the course of the index, adding that foreign investors' entry into the Borsa Istanbul share market, which was made attractive by low multipliers at the end of 2016, has strengthened.

Stressing that the increase in CBRT funding costs in January and the confidence given by the tight stance in terms of monetary policy have given momentum to the entry of foreign investors, Doğan said, "Exchange rate estimates at the time of entry and exit as well as the valuation of stocks have an effective impact on the entry of a foreign investor into a country. The fact that the decisions taken by the CBRT in January and the current interest rates omitted the Turkish lira from being an easily sellable currency became the main factor that boosted interest in Borsa Istanbul which holds attractive long-term valuations."

Noting that the current levels in the BIST 100 index are still attractive for investors considering a few years of maturity, Doğan said that the increasing anticipation of the 2019 general elections after the April 16 referendum have a positive impact on investor decisions in terms of Turkish lira assets.

On the other hand, pointing to the recent debates on the reinstatement of the death penalty in Turkey that suggest the possibility of a new referendum as well as the extension of the state of emergency, regulations on the transition to the presidential system of governance and possible Cabinet changes coupled with worries that politics might be brought to the fore of economic trends and data for some time; potentially suppressing the appetites of investors, Doğan suggested that foreign investors might monitor their positions in the short term from time to time in accordance with the political and geopolitical developments. He said, "Even though the wide perception is that foreign investors maintain their positions for a very long time, recent short-term position changes, including algorithmic transactions, are also a point of focus," Doğan said. "However, it should not be ignored that the mobility in the markets diminishes during the May-to-September period, so new entries can diminish in this period, as well."

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