The Borsa Istanbul Stock Exchange (BIST) hit an all-time high this week, with its benchmark BIST-100 index breaking through the 10,000-point barrier for the first time in its history. This milestone comes as foreign investors have significantly increased their holdings of Turkish equities, attracted by the country's economic stabilization efforts and improved market conditions.
The BIST-100 index closed at 10,245 points on Wednesday, representing a 28% increase since the beginning of the year and making it one of the best-performing major stock markets globally in 2024. Trading volumes have also surged, with daily turnover exceeding 45 billion Turkish lira ($1.4 billion) in recent sessions.
Foreign Investment Surge
According to data from the Central Securities Depository of Turkey (MKK), foreign investors have purchased a net $2.7 billion worth of Turkish equities since January, reversing the outflow trend observed in previous years. Foreign ownership of Turkish stocks has now reached approximately 38%, up from 32% at the end of 2023.
"We're witnessing a significant reallocation of global portfolios toward Turkish assets," said Osman Gençtürk, Head of Research at Capital Securities in Istanbul. "International investors are recognizing the value proposition of Turkish equities, which are trading at attractive multiples relative to other emerging markets."
"The Turkish stock market's performance reflects growing investor confidence in the country's economic management and the normalization of monetary policy," commented Emma Rodriguez, emerging markets strategist at Global Investment Partners in London.
Economic Factors Driving the Rally
Several factors have contributed to the market rally and increased foreign investor interest. The Central Bank of Turkey's commitment to conventional monetary policy and its focus on fighting inflation has helped restore credibility among international investors. The bank has maintained high interest rates, with the benchmark one-week repo rate currently at 45%, demonstrating its dedication to price stability.
Additionally, Turkey's economic growth has shown resilience despite the tight monetary policy. The country recorded 5.1% GDP growth in the fourth quarter of 2023, exceeding analyst expectations. The International Monetary Fund recently revised its 2024 growth forecast for Turkey upward to 3.0% from the previous 2.6% estimate.
"Turkish corporations have demonstrated impressive adaptability to challenging economic conditions," noted Kemal Baydur, portfolio manager at Anatolian Asset Management. "Many listed companies have healthy balance sheets, strong export profiles, and have managed to maintain profitability despite high interest rates."
Leading Sectors
Banking stocks have been among the top performers on the Borsa Istanbul, with the banking index up over 32% year-to-date. Major banks such as Garanti BBVA, İş Bank, and Akbank have benefited from improved net interest margins and decreased loan loss provisions.
Energy and industrial companies have also performed strongly, particularly those with significant export exposure. The manufacturing sector has been buoyed by the competitive advantage provided by the previously depreciated Turkish lira, which has helped boost exports despite recent currency appreciation.
"Turkish exporters have been particularly attractive to foreign investors," explained Fatih Keresteci, equity strategist at Istanbul Investment Research. "Companies with strong export profiles offer a natural hedge against currency fluctuations while benefiting from global economic growth."
Market Outlook and Challenges
Despite the positive momentum, analysts caution that the market faces several challenges. Inflation remains stubbornly high at nearly 70%, although it has shown signs of peaking. The sustainability of the rally will depend largely on continued progress in reducing inflation and maintaining policy discipline.
Geopolitical risks also remain a concern, particularly given Turkey's strategic position between Europe, the Middle East, and Asia. Any escalation in regional tensions could impact investor sentiment toward Turkish assets.
"While we maintain a positive outlook on Turkish equities for the medium term, investors should be prepared for periodic volatility," advised Mert Yılmaz, chief strategist at Blue Bosphorus Investment. "The key factors to monitor will be inflation trends, central bank communications, and the government's commitment to orthodox economic policies."
Corporate Governance Improvements
Market participants also highlight improvements in corporate governance as a factor attracting foreign investment. The Capital Markets Board of Turkey has strengthened regulatory frameworks, enhanced disclosure requirements, and improved minority shareholder protections in recent years.
"We've observed a meaningful improvement in corporate transparency and governance practices among Turkish listed companies," said Lisa Chen, ESG analyst at Global Sustainable Investments. "This evolution is making Turkish equities more accessible to a broader range of international investors, including those with strict ESG criteria."
