In every emerging market, the capital flows from developed countries have the ability to determine the direction which asset prices move into. Particularly, in Turkish stock market where the foreign investors hold roughly 65% of total assets have strong influence on returns. To this extent, the chart above show the net weekly transactions by non-residents in Turkish stock market and the benchmark equity index’ return during the same period. Interestingly, foreign investors have been consistently selling Turkish equities since September 5, and since that time we have seen Borsa Istanbul 100 index has fallen by 9%.
These portfolio flows are even considered as good tools to explain crisis in some cases, and vice versa, crisis most of the time can explain the volatility of portfolio flows.