When Gezi incidents coincide with global fluctuation

Financial markets in Turkey began the week with a historic fall. It would be a mistake to conclude that a fall of this height is only affiliated with the Gezi incidents.

Even if the global markets were following a stable course, there would have indeed been a serious fall experienced in the markets because of the growing of Gezi incidents. However, it would be much healthier to make assessments knowing that the fluctuating and unpredictable course in global markets has deepened this fall.

Market players already knew at the weekend that, due to the growing and spreading of Gezi incidents, they would start the week with a fall. However, their hopes were for the atmosphere to become moderate when the week started, for the demonstrations to end and for the tension that affects the market to lessen, but it did not happen…

When viewed from the point of the global markets, it was expected that the fluctuating course that was experienced one week before would also continue this week. For this reason, the expectation that the week would start with a fall was already there.

However, the tension experienced on the first day of the week, despite all this, has completely surpassed all expectations. This has caused further despair in the markets for the future.

When we spoke to market players, we saw that the expectation that the volatility of the global markets would continue was a dominating one. Even if the American central bank FED maintains its existing monetary policy stance, it looks highly probable that perceptions and expectations related to when it would end its asset purchases would increase the volatility of the markets in the coming months.

It is possible to say that the data that will come from the United States in the coming couple of months will be monitored closely by markets. In the case that the domestic political confrontation atmosphere continues in the meantime, it would be inevitable that the fluctuating course of the markets would continue, more precisely falls would continue.

It is inevitable that the cases of FED decreasing or stopping its asset purchases would negatively affect incoming capital flow to Turkey. In this case, it is also inevitable that it would create an upward pressure especially regarding exchange rates. So, it also looks inevitable that the U.S. will increase treasure bonds interest rates thus making interest rates in Turkey have an upward trend.

In the case that it becomes evident that there are not and there will not be any serious changes in FED’s asset purchases in the coming term, it is certain that both global markets and markets in Turkey will have a more relaxed course.

Damaged confidence

Even if the global markets have a calm course, the most important factor that would shape the developments in domestic markets will be political developments to come.

Political stability had a significant share in the economic stability trend maintained up until now. Because of the Gezi Park incidents, the confidence in the atmosphere of political stability has absolutely been damaged.

Confidence, as it always has been, is a component hard to earn but easily lost. Unfortunately, this confidence has been damaged. Whether the attitude of the government from now on will be one of rebuilding the confidence or maintaining the confrontation will, I think, determine the direction of the markets.