Nothing New on the Western Front…

S&P is expected to make a statement on Turkey’s credit rating tonight. In their previous statements, S&P had said, “We may revise Turkey’s outlook up to stable if inflation can be kept at a moderate rate”.

However, Turkey has not been able to keep it under control, I expect S&P to confirm the current outlook for Turkey. Although inflation remains low for now, compared to previous months obviously, the rating agency would definitely not ignore the fact that it is still in double-digits as well as two times higher than the inflation rates in emerging markets.

Yesterday’s tiny increase in exchange rates clearly shows that investors still remain cautious. And when this is the case, they tend to consider dollar an “emergency exit”. But, obviously this state of cautiousness will not last too long given the fact that there’s not much movement in benchmark rates.

“Who sells these stocks?”

It appears like foreign investors sold a considerable amount of stocks last week compared to BIST scale. As a matter of fact, daily trading transactions were not carried out mainly by foreign investors. I think domestic investors trading abroad rather bring bigger impact on daily trading. Back in the day, this type of investors was called “mustached foreigner”.

In a globalizing world, I believe that “prop traders”, in other words investors involved in short-term proprietary trading, from all around the world prefer BIST for trading, which is very humble of them indeed. When we consider this and the fact that a large part of current account deficit is narrowed down thanks to portfolio investments, it looks like a more extensive analysis is required.

Prof. Dr. Emre Alkin