First signs of foreign inflows?
of the last few weeks suggest that non-residents are beginning THE DATA to show renewed interest in Turkish securities.
According to Central Bank data, there were large purchases in the following two weeks after five consecutive weeks of outflows in equities. After four weeks of uninterrupted outflows in government debt securities, there was buying last week.
Foreign investors bought USD 429m worth of stocks between March 15 and 22, this year’s most extensive stock purchase. Foreigners’ purchases continued last week as well. Net purchases in the previous week of March amounted to USD 267m. Thus, foreign investors’ net purchases in the second half of March reached USD 695m.
This inflow shows the net amount adjusted for price and exchange rate movements. Foreign investors’ government domestic debt securities purchases, again adjusted for price and exchange rate movements, amounted to USD 112m last week.
The purchases in the first quarter could have been better than the heavy buying in the last two weeks, especially in equities. Foreigners’ stock purchases in the first three months amounted to a net of USD 287m. The net amount in government domestic debt securities is almost zero. Foreigners sold a net of USD 1m in the first quarter.
The interest rate increase affected domestic debt securities purchased last week. It would not be surprising to see foreign investors’ interest in domestic debt securities increase further with the interest rate hike.
One of the most important developments that will affect foreign investors’ interest in Turkish securities is undoubtedly the election. Moreover, the result will ensure a balance between central and local administrations in Turkish politics. We will see the attitude of foreigners after the election in the first data covering April 1-5, which will be released next Thursday.
Even though it will not change the government, the fact that the elections are over and uncertainty is left behind is essential for attracting foreign investors. But only if we don’t create new problems ourselves.
Under normal circumstances, there is no election until 2028. Even if the parliament decides to hold early elections to allow Erdogan to run for the presidency once again, this will not happen in a few years, but it will be on the agenda towards 2028. However, the ruling AK Party delegates are testing their chances for a constitutional amendment. Moreover, as Numan Kurtulmus, Turkish Parliamentary Speaker, put it, they are not talking about amending the Constitution but making a Constitution.
This process could be painful, and the supposedly calm post-election days could give way to chaotic days of controversy. And we will have to forget about the foreign inflows that will provide foreign exchange inflows.