Turkish market losses fell today, Tuesday, March 23, in conjunction with some investors flocking to conduct deals on the Turkish stock exchange, taking advantage of the decline in stock prices during the past two days, after the dismissal of the governor of the Turkish Central Bank, Naji Iqbal.
The Turkish lira also rose today, Tuesday, by 1%, after falling yesterday, to close to a record low, according to a report by the agency. Reuters.
On the other hand, the Russian ruble was among the biggest losers among the major currencies in the world today, Tuesday, as it fell by 0.8% to its lowest level since February 5, 2021, as Russia prepares for a new round of US sanctions due to what Washington says is interfering in the US presidential elections. For 2020, which Moscow denies.
The main stock index on the Turkish Stock Exchange recorded its largest decline in 20 years on Monday, and the Best 100 index began work today, Tuesday, with a decline of 9%, which led to the suspension of trading to reduce losses, but after a few hours, Turkish stocks compensated almost all their losses, according to Agency report Bloomberg American.
The secret of Turkish stocks regaining part of their losses
After the decline in prices on the Turkish stock exchange on Monday 22 March in the wake of President Recep Tayyip Erdogan’s decision to dismiss Central Bank Governor Naji Iqbal, it seemed that the markets had finally calmed down following reassuring statements from Turkish officials.
Yigit Bulut, Erdogan’s chief adviser, said the central bank would avoid any major steps under the new governor, Shihab Kavçioglu. He also emphasized Erdogan’s monetary policy theory, which assumes that high inflation results from higher interest rates.
Monday’s drop erased most of the lira’s significant gains since November 2020.
The shares of the issuing companies lead the Turkish stock exchange
“We are starting to remove some reservations because we see profit opportunities in some Turkish stocks,” said Samih Kara, chief investment officer at Tacirler Asset Management, the stock fund with the best returns in 2020.
Kara added that the fund is mostly looking to add non-bank names, especially from the shares of exporters and companies with strong financial positions that do not have foreign currency debts.
The Best 100 Index trimmed its losses to decline by 1.7% as of 12:31 pm Istanbul time, thanks to gains in shares of exporters and Turkish companies with income in foreign currencies. The bank stock gauge lost 6.8% after falling to 9.6% earlier.
Akbar Khan, Director of Asset Management at Al Rayan Investment Company in Doha, said: “Investors had a difficult situation to accept with the emergence of a new central bank governor. Iqbal had quickly built valuable credibility with investors thanks to his proactive measures, so his sudden departure – led to – Besides the lack of clarity of future policy – to leaving investors anxious about the worst. ”
The lira rose 0.4% to reach 7.7727 against the dollar at 10:58 am Tuesday, March 23, 2021 Istanbul time, after falling by up to 15% on Monday.
However, options traders have been the most preemptive of the currency to date, as shown by the one-month risk reversal.
While the yield on the 10-year bonds of the benchmark local currency in Turkey increased by 9 basis points to 18.98%, the highest level since May 2019, following its historic 483 basis points jump on Monday.
Yirlan Sezdikov, global head of emerging markets at Amundi, the largest asset management company in Europe with 1.7 trillion euros ($ 2 trillion), said: “What will determine the investors’ desire to invest in the Turkish lira in the long term is the assessment of the ability of the new economic team to maintain stability. Macroeconomics, providing a transparent framework for monetary and fiscal policy. “
It is noteworthy that the markets did not react strongly to the dollar’s rally in recent weeks as investors bet on that Global economic recovery It will stimulate buying of emerging market currencies.
Strong economy and tough equation
And in the Turkish economy Well developed manufacturing sector compared to most other emerging markets And a currency that is heavily traded internationally and large external financing requirements, making it vulnerable to fluctuation and vulnerability to global investor sentiment.
Faces The Turkish economy is a difficult equation, As its performance was the second best economy in the G20 after China in the third quarter of last year, in light of the world’s suffering from the Corona pandemic.
This performance was achieved thanks to a fiscal stimulus campaign implemented by the government, which sacrificed the lira and stabilized prices, according to a previous report by the agency Bloomberg American.
Focusing on raising interest rates, as the dismissed governor of the Turkish Central Bank did, would make the lira attractive to hot money investors, but it might affect economic growth and raise the cost of borrowing for companies.
Also, emerging economies that have tended to focus on financial policies that satisfy investors of hot money have achieved some monetary stability, but South Africa offers a lesson that this came at the expense of other factors that may be of great importance, according to the agency. Reuters.
The South African economy, for example, is in recession, and this year’s budget deficit is likely to reach 14% of GDP, and rating agencies have downgraded their credit rating to “junk”.
The slope of the yield curve also indicates long-term concerns about the government’s ability to pay its dues in 2024, and debt servicing costs will consume 16% of government spending.
On the other hand, Turkish Trade Minister Rohsar Bakjan announced, That the country’s exports recorded a record increase and the highest among all the months of February since the establishment of the Turkish Republic Public 1923, expressing confidence in an increase in Turkish exports during the year 2021.