Positive Results in the Fight Against Inflation
As the steps taken globally to combat inflation continue to gradually yield positive results in macroeconomic data, concerns persist that the U.S. Federal Reserve (Fed) will not act hastily in reducing interest rates.
During the busy earnings season in the U.S., companies, especially those in the technology and artificial intelligence sectors, have performed better than expected, providing upward support to stock markets. However, the uncertainty regarding when the Fed will begin interest rate cuts stands out as a key factor dampening risk appetite.
Analysts emphasize that pricing in the money markets indicates that the likelihood of the Fed reducing interest rates has been postponed to the last quarter of the year. They also remind us that other major central banks are likely to start rate cuts before the Fed.
There remains uncertainty regarding the steps the European Central Bank (ECB) will take following its first interest rate cut. Analysts note that the pace of easing by the ECB could impact the dollar’s value against other major currencies.
In a potential “strong dollar” scenario, analysts indicate that volatility in stock markets could increase, highlighting that the timing of the Fed’s interest rate cuts remains a focal point for investors.
BIST 100’s Highest Monthly Close in 9 Years in Dollar Terms
This year, a rally led by technology companies on the New York Stock Exchange has also spread to European and Asian stock markets, with the BIST 100 index continuing its performance that outpaces important indices around the world.
Since the beginning of the year, the Nasdaq index has risen by 11.48%, the S&P 500 by 10.64%, and the Dow Jones by 2.64% in the U.S. In Europe, Germany’s DAX 40 index increased by 10.42%, the UK’s FTSE 100 by 7.01%, France’s CAC 40 by 5.96%, and Italy’s MIB 30 by 13.64%.
In Asia, Japan’s Nikkei 225 index rose by 15.04%, China’s Shanghai Composite index by 3.76%, Hong Kong’s Hang Seng index by 6.06%, while India’s Sensex increased by 2.38%, and South Korea’s Kospi index fell by 0.72%.
During this period, the BIST 100 index surged by 39.23%, reaching 10,400.48 points, surpassing significant global indices and also achieving a monthly closing record. The index peaked at 11,088.01 points.
Since the beginning of the year, the BIST 100 index has increased by 27.41% in dollar terms, reaching 322.94 points, marking its highest monthly close since February 2015.
Upon examining sector indices, it is noteworthy that the banking index has increased by 72.79% and the holding index by 45.88% since the beginning of 2024.
This year, all sector indices have brought joy to investors, with the insurance sector leading gains at 90.30%. Among the main indices, the financial index has also shown an impressive increase of 51.93%.
A closer look at stocks reveals that out of the BIST 100 index components, 80 stocks gained value while 20 stocks saw declines. The most traded stocks from January to May were Turkish Airlines, Ereğli Demir Çelik, Türkiye İş Bankası (C), Yapı ve Kredi Bankası, and Akbank.
Among stocks with the highest increases since the beginning of the year, Tav Havalimanları leads with 124%, followed by Garanti BBVA at 93%, and Anadolu Sigorta at 91%. On the other hand, Qua Granite with a 41% decrease, Hektaş with 27%, and Europower Enerji with 27% were the most significant decliners.
This year, the average daily trading volume in the BIST 100 index has been 108.1 billion lira, while last year, the daily average was 97.8 billion lira.
Last year, the index set a volume record of 224.9 billion dollars on August 24, and this year, on May 21, it recorded the second-highest volume day ever at 215.5 billion dollars.
Turkey’s 5-Year CDS Falls to 261 Basis Points
In this context, analysts emphasize that the measures taken by the economic management in the fight against inflation have been effective, noting that confidence has improved among domestic and international investors following a shift back to orthodox economic policies, leading to increased interest in Turkish lira assets.
Analysts also draw attention to the positive reports released by international institutions and organizations about the Turkish economy, reminding that international credit rating agencies have upgraded Turkey’s credit rating.
Standard & Poor’s (S&P) upgraded Turkey’s credit rating from “B” to “B+” last week, indicating that post-local elections, it is expected that coordination between monetary, fiscal, and revenue policies will improve due to external balance effects. S&P also stated that portfolio inflows are expected to increase over the next two years, with forecasts of a narrowing current account deficit and a decrease in inflation and dollarization.
Fitch Ratings also upgraded Turkey’s credit rating from “B” to “B+” in early March, changing its outlook from “stable” to “positive.” Moody’s confirmed Turkey’s credit rating as “B3” at the beginning of this year and shifted its outlook from “stable” to “positive.”
Analysts believe that if lasting slowing in inflation and a decline in the current account deficit can be achieved in the future, there are ongoing expectations for a potential rating increase in Moody’s upcoming assessment of Turkey on July 19.
As a result of these developments, Turkey’s 5-year credit default swap (CDS) continues its downward trend, reaching the lowest level since February 2020 at 261 basis points on Friday.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
