As such, as you can see in the left column of the table below, the Turkish stock market is the market with the best performance in the world in terms of dollars in a weekly period, while it still remains in the lower ranks both in August and in the ranking from the beginning of the year to the present.
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It is impossible to design Turkish scenarios independently from abroad.
Just as you compare the A B C sectors or stocks and make some adjustments in your portfolios by selling the ones that are relatively expensive to buy, global funds not only do this on a sector-company basis, but also frequently change their weight on the basis of countries.
Although the influence of foreign investors on the direction of Turkish asset prices has decreased somewhat, they still continue to be the dominating force.
Moreover, there are institutional and individual investors who behave like foreigners. Money has no nationality, there are universal rules for managing money. Price, namely discount, is one of the most effective factors in this sense.
The two charts below show how much the Covid-19 damage and recovery speed are diverging in the economies of the countries in the best way. Stock market indices are the most reliable barometers of economies.
Turkish markets are among those most affected by this crisis through CDS and foreign exchange reserves. But he is not alone. The past six months brought very different pricing on the basis of country and sector.
While markets recovered rapidly in countries such as the USA, Germany, and Canada, asset prices in many countries, including England and France, took more permanent damage.
If a permanent positive divergence begins in the remaining ones (in countries such as Chile, Colombia, Spain, Hungary, and the Philippines), this will strongly reflect on Turkish assets.
If not in the near term, I expect a strong positive divergence to start in the last part of the year and to continue in the first two quarters of the next year in this country group.
Let’s go back to the near term. In the charts above, each line shows the course of a week.
In the last week of July and the first week of August, Borsa Istanbul depreciated by as much as 18 percent independently of the world, and at the same time, negatively dissociated in TRY, we witnessed rapid jumps in domestic exchange rates and bond interests.
As I repeat at every opportunity, the discount may not be sufficient on its own to trigger the movement, although it creates a basis.
However, when excessive discounting occurs, prices may well go up even if there is no news or expectation.
At the end of the first week of August, BIST was at extreme discount. The factor that caused the excessive discount was the acceleration of the increase in the exchange rates, and this problem soon led to the preparation of the prescription.
Prescription TRY supportive successive steps.
In this way, although BIST has closed some of the difference compared to other country stock markets in the last two weeks, as you can see in the chart above, it still has a long way to go.
Do not associate the measured positive divergence experienced in the last two weeks in Borsa Istanbul with the natural gas reserve.
When BIST declined from 1200 points to 985 points on Friday, August 7 in seven trading days, there was neither natural gas reserve nor an unusually different positive expectation.
The only thing that happened was the disguised interest rate hike by the CBRT and banks. This factor change was enough to raise the index from bottom to top by 6 percent in one day, as prices were extremely discounted.
BIST closed at 1060 points on Friday, August 7th. It also reached 1100 points in the last week and the good news signal came on Wednesday.
If you say where the week ended following the gospel, although 1141 points were tested on Friday, it was 1092 points below the Wednesday value when the closing good news signal came.
Annunciation pricing took two days, gaining sharpness on a company basis, and the stock market gave back the premium it recorded with the realization that fell short of expectations.
For this reason, I do not think that there will be sales in the coming days and weeks on the grounds that it is below the level of the news in the reserve media in general.
The near-term course will be determined by the overseas trend and the pricing in TRY.
My favorite scenario for the three-month period until mid-November abroad is that the horizontal trend, which has been experienced for two months as the main theme, will continue, although intermediate flows in both directions continue.
I think a game-changing factor change is needed for a big permanent change abroad.
BIST, which has support at 1070 points, has a positive divergence potential of 6-7 percent in the coming weeks, as it is still relatively discounted.
In the coming weeks, we will witness a process in which the effectiveness of the monetary policy, which we can define as the Turkish-style interest rate cocktail, is tested on behalf of TRY.
Yes, the CBRT did not change the signage rate and left it at 8.25 percent, but if you go to the Central Bank and say that this rate is cheap, let me buy it, neither you nor the banks can borrow TRY with this interest.
When it is said that we have nothing left of it, let’s give it here, the interest rate applied is in the band of 9.50-11.0%.
As a matter of fact, deposit rates in all banks are at similar levels.
In summary, the signage rate did not change in Turkey, but the transaction interest changed two weeks ago.
The aim is that individual and corporate locals, who are seen as the main backbone causing the rise in foreign exchange, encounter relatively high monthly deposits, so that they give up on foreign exchange, and even become sellers if possible.
Although the lack of a lean policy and the fact that it is open to changes on a daily basis may continue to be a restraining factor in foreigners’ choice of TRY, the deposit rates that are essential for locals and I therefore think that the risk of a sharp rise in exchange rates in the coming weeks will decrease.
The calming of the foreign exchange front in the country will also be positive for Borsa Istanbul.
Because the factor that caused the sharp depreciation in BIST three weeks ago was the rapid increase in the exchange rate and then the rapid increase in inflation and this might push the economy into recession with a sharp violence.
This concern has a large share in the fact that foreign investors have been on the seller’s side for months.
If you ask what is the near-term potential on behalf of Borsa Istanbul, I am of the opinion that BIST can rise to around 1200 points in the next 8-10 weeks by gaining strength from the positive intermediate flows abroad.
However, even if this move will take place, I do not expect a course in which all the shares of the family will rise.
There are many companies that are expensive or have found their value in BIST. The upside potential applies to those who remain extremely discounted, including banks, with no expectation of bad news on the horizon.
Without a doubt, the first thing that comes to mind as a game changer abroad is Covid 19.
The existing theme is that the rate of spread of the virus increased in Europe in August, but this did not escalate to a level that would stop economies or cause panic in societies.
October-November is the track that everyone is eagerly waiting for on behalf of the spread rate of the virus.
On the other hand, vaccine studies continue at full speed, and in the next three months, while the epidemic accelerates, news that an approved vaccine may be found, seems to fall to the agencies.
This pair of factors, one positive and the other negative, balances each other like a seesaw.
If one of them stands out, it will undoubtedly drag the pricing behind them.
However, I do not think that it will reach a level that will exceed 10-15 percent, even if the virus gains momentum in this three-month period and there is a palpable sales in the stock markets.
If you ask whether a possible hard negative intermediate current will be permanent, I think it is difficult.
If it happens to the contrary (as in Turkey at the beginning of this month), I think it will be a very important buying opportunity abroad.
Moreover, I find the probability of such an intermediate negative flow to occur in the next few weeks to be low, on the contrary, I suspect that an upward intermediate flow abroad will occur more likely in the near term.
If you ask what is the probability of a sales wave that will reach 10-15% in the next 3 months in the world, I would say 50 percent, at most, I would say 35 percent probability.
Well, there may be readers who say why are you waiting for a global rally starting from mid-November at the latest.
The calendar of the markets works 6-9 months ahead of real life. What will be priced in the end of 2020 will not be the tomorrows under our noses, but the economic activity in the second half of 2021.
All scenarios are that Covid 19 will fall off our agenda in mid-2021.
That’s why, after the US elections, which will take place on November 3, are behind, I think that the second half of 2021 will begin to price with a new rally in financial markets, reminiscent of the April-June 2020 period, starting from the end of November at the latest.
There may be those who say that they are bored while reading it is very troublesome and tiring. This is exactly why GPG (available from all banks) invests in asset markets and currencies with varying weights, both at home and abroad, on behalf of those who cannot monitor the markets regularly.