Turkish stock exchange hopeful of 2024

ISTANBUL

In 2023, the BIST100 index remained below the performance of 2022 and inflation, but there is a premium of about 35 percent. The policy based on high-interest rates, which changed with the new economic management after the elections, mobilized alternative markets. Interest rates, foreign exchange and gold protected investors relatively from inflation compared to the stock market.

For 2024, the main reference for the markets will be the economic program that has been implemented. The program is praised by both domestic and foreign financial circles, and there are portfolio inflows from foreign investors. They first came to bonds and bills because of the high-interest rates. Then, they have been buying stocks for the past two months. Their total purchases in stocks and bonds are around $3.5 billion.

On the other hand, Türkiye's risk premium and Eurobond interest rates continue to fall. After S&P downgraded Türkiye's credit outlook to positive, expectations of a credit rating upgrade have increased. However, adherence to the current economic program plays a key role in maintaining this outlook.

No change in the economic model is expected before or after the local elections in March. If serious progress is made in the fight against inflation, a review can be expected. In this context, foreign investors have started to invest in the economic program and the team implementing it.

The share of foreign swap deposits at the Istanbul Stock Exchange, which has continued to rise in recent days, has exceeded 38 percent.

The markets' hopeful entry into 2024 is based on confidence in the economic program and the start of capital flows from abroad.

On the other hand, with the gross reserves of the Central Bank reaching a record high of $145 billion, the net reserves falling to minus $30 billion and the current account surplus in the balance of payments for the last two months, the collapse of the amount of currency-protected deposits and the ongoing transition to the Turkish Lira are also noteworthy promising developments for 2024.

Optimism about external market conditions also contributes to this outlook. Despite this outlook, the continued selling pressure on the BIST100 Index can be attributed to the cautious stance of domestic investors due to low volumes, the intensity of outflows from the market in 2023 (79.3 billion liras) due to IPOs, the decline in new investor inflows and high-interest rates.

Long-term investors may also be looking forward to the inflation accounting that will come into effect with the new year and the results of the local elections in March. Although the trading volume is low in reaction to the sharp decline in the BIST100 index, the recovery efforts on Borsa Istanbul may continue.