The Turkish stock market's recovery is closely tied to monetary policy changes, particularly interest rate adjustments by the central bank.
Foreign investment sentiment is heavily influenced by economic indicators such as inflation rates and minimum wage adjustments, which could affect market stability and growth.
The potential for a rate cut is seen as a crucial factor for attracting foreign investors back to Turkish stocks, which have suffered from significant outflows in recent months.
If the central bank proceeds with rate cuts, Turkish stocks may see a significant rebound, attracting both foreign and domestic investors.
A measured increase in the minimum wage could further bolster investor confidence, leading to a more stable economic environment.
Continued improvements in inflation rates may encourage a more aggressive rate-cutting cycle, enhancing the attractiveness of Turkish equities.
Turkey's stock market is showing signs of recovery, driven by expectations of an imminent interest rate cut by the central bank. The Borsa Istanbul 100 Index (BIST 100) has experienced a decline of approximately 10% since June, primarily due to higher interest rates making other investments more appealing. However, recent indications from the central bank suggest a potential easing of monetary policy, which has sparked optimism among investors.
Despite a challenging year, where foreign investors sold off $2.5 billion in Turkish stocks, the market is beginning to stabilize. Analysts believe that the worst may be over, contingent on new catalysts such as the anticipated interest rate cuts and adjustments to the minimum wage, which President Recep Tayyip Erdogan has pledged will outpace inflation.
The central bank raised interest rates significantly from 8.5% to 50% between June 2023 and March 2024, but hints of a rate cut in November have shifted investor sentiment. Economists predict that any rate cuts will be gradual, but they could serve as a turning point for Turkish stocks, which are still up 30% in 2024 despite recent bearish trends.
