Baris ERKAJA
Portfolio investment followed the takeover of Turkish banks by major banks. At the beginning of 2002 it had risen again to over 40 percent. In the meantime the government had changed in Turkey and after a long time the excitement about one-party rule dragged the index with it.
EU HISTORY AND THE CHEAP EXCHANGE
After that, even greater anticipation dragged out the agenda. Turkey’s EU accession process. In fact, the process that started in 1999 was interrupted and Turkey, which had become a candidate country, was not able to start accession negotiations. But 2005 was a serious turning point. European capital that flowed into Turkey, under pressure from the USA, had shown the gateway to Turkey in order to guarantee its investments on its own terms. The second largest anchor pushed Turkey higher with each passing day, money flowed into Turkey, cheap Turkish assets, especially Turkish stocks, were muddled. At the end of 2005, the proportion of foreigners at Borsa Istanbul had reached 66.3 percent.
LOST ANCH AND AFTER
Although this excitement continued with the chapters negotiated between 2006 and 2010, there was a long period of stagnation after 2010. The proportion of foreigners, which reached 73 percent in 2007, began to fall from that point on. After this period, relations with emerging nationalist currents in major European countries gradually became strained, and recent tensions over visa-free travel for Turks in Europe, particularly in 2016, was where the ropes broke. Turkish assets, which had long been awash with foreign capital, had lost their main anchor. We’ve seen the foreign share fall below 62 percent in 2011, and an Alsace game between 2012 and 2018, with foreigners selling high and buying low whenever they find the opportunity. Borsa İstanbul was no longer run by foreign funds that built portfolios for decades, but by the kind of funds that sold their portfolio when they saw the slightest profit. After losing its biggest story, Borsa Istanbul has faced an endless wave of overseas sales since 2019. The only positive aspect of this process was the dominance of a crowd of Turkish investors, which spread to domestic investors and owned the shares sold by foreigners.
ATTENTION! A NEW STORY CAN FLY
What will happen next? As we did 20 years ago, we are again entering an election period. Here, too, we see rising inflation and profits, which in turn inflate balance sheets. With inflation no longer an indicator, we have Turkish assets that are getting cheaper compared to the dollar. Although it seems that foreigners are still not buying, the fact is that they cannot remain indifferent to such cheap prices forever. We also see that they are starting to say the word “opportunity” a lot. Especially at a time when the dollar is now overvalued around the world and comments are mounting that its value may have peaked. If the Fed does not make a major change and moves more dovishly in the period leading up to September, it is expected that there will be some serious cash flow to emerging markets. Here the main issue will be: What is the history of Turkish markets compared to alternatives? This does not have to be a history of the European Union either. Structural change is also a serious matter. Election scenarios are also stories that have caused many buying reactions in the past. It’s about inventing a story that convinces foreign investors to buy Turkish stocks. The good thing is that although shares on the stock market seem to have gone up astronomically in TL compared to when foreigners started serious selling, they are at cheaper levels as they sell the opposite in dollars. If we take July 2009 as a milestone, the BIST 100 index is even half as cheap. This could give Turkish investors the opportunity to easily sell their long-held stocks to foreigners if a true Turkish story can be revealed at twice the price. Because of this, there’s still an opportunity to put short-term developments aside and focus on the broad picture, either keeping the stocks on hand or taking a position on any decline in giant company stocks that are still well below their value.
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