“Domestic investors on the Turkish stock exchange are replacing foreign ones who are likely to withdraw from the country if the lira continues to lose. For local investors, shares are a way to defend against inflation, but it will not last forever, “explains Patria Finance economist Tomáš Vlk, adding that the resignation of foreign investors to Turkish shares may reverse the direction of the local stock exchange. “Everything now depends on how the lira and the next onset of the currency crisis will withstand,” he emphasizes.
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Investments of 2021: Commodities, stocks, cryptocurrencies and bonds • VIDEO Videohub
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The Turkish stock market is dominated by bets on exporters there. The fall of the lira significantly improves their position. “On the one hand, the local exporters do not have such a bad economic situation to such an extent, on the other hand, the falling lira helps them to grow. As a result, the share price is rising in the Turkish lira, ”explains analyst Tomáš Tyl from Fichtner. While the Turkish lira is falling, export stocks are holding value. “Export-oriented business is not threatened by the situation from the point of view of investors,” adds Tyl.
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However, the Ankara stock market also attracts risky investors who are betting that Turkey will get out of trouble. “Many Turkish titles are at extremely low valuation levels,” recalls Cyrrus’s portfolio manager Tomáš Pfeiler. According to him, an example is the move of the Spanish bank BBVA, which increased its stake in the Turkish financial house Garanti in order to take advantage of the extremely cheap valuation of its shares on the Turkish stock exchange.
At the same time, shares are not the only insurance of the Turks against financial shocks in the country. “Bitcoin trading volumes have been growing in recent weeks as the authoritarian government systematically undermines its official currency,” said David Morris, CoinDesk cryptocurrency expert.
The fire in the Turkish currency market, during which the lira fell to a historic low against major world currencies, was triggered this week by the central bank’s fourth rate cut. Investors thus fell into fears of a further acceleration in price growth and another currency shock.
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“If inflation in Turkey continues to rise, which is likely to be due to lower interest rates, the Turkish lira can be expected to continue to weaken,” said XTB analyst Jiří Tyleček.
Both economists and stock marketers have blamed Turkey’s central bank for indirectly fulfilling the views of President Recep Tayyip Erdogan, who has long pursued a low interest rate policy, even in an environment of soaring inflation. The president shook the markets for the first time in March this year, when he appointed Sahapa Kavcioglu’s supporters of the relaxed monetary policy to head the central bank.
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