New BIST trend? Well…

Dünya Executive - - DATA -

► The peak was in April 2010 when BIST 100 was at its high­est in dol­lar terms. After Ber­nanke spoke in May 2013, it has been head­ing south as a clear trend.

► Yes, it is cheap by that met­ric, but then it has a long his­tory of be­ing cheap. Any move­ment north has been short-lived thus far. Yes, one can make money, but if one ex­pects a new trend for­ma­tion as the in­dex it­self is con­cerned, well…

► The USD/TRY nom­i­nal rate has been up by 8.73 per­cent CAGR since June 2003, and CPI by 9.03 per­cent since then CAGR. But if we take Lehman as the base time, the lira has de­pre­ci­ated by 15.03 per­cent CAGR. CPI CAGR de­pre­ci­a­tion since then was 9.32 per­cent. Given the ex post real TRY in­ter­est rate of on av­er­age three per­cent, the dif­fer­ence is rather large.

► There is now a built-in mem­ory to the ef­fect that FX de­posits carry more yields, and they pay off hand­somely if hold­ers wait for a suf­fi­cient time. So, each time rates are cut, one has to con­sider and re­con­sider this rather long mem­ory. The pre­vi­ous mem­ory, 2002-2008, has been lost.

► The idea is there­fore two-fold. One, non-res­i­dents should find it op­por­tune to jump in, and two, res­i­dents should be con­fi­dent enough not to switch to dol­lar de­posits. These two aren’t al­ways just two sides of the same coin though.

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