Concerns about Fed over-optimism admission and shortening the time from taper to rate-hike somehow did not spark a major risk-off dump in Turkish equities. Equities are traded just below the previous day’s close while major banks such as Halk, Is, Vakif, Yapi are in green territory. Meanwhile bonds are having a bad day as 2-year rates jump to 11,14% but at least not as bad as they performed last May when Bernanke’s taper hit. In a nutshell, the market has stronger liking for Janet Yellen that it has for Ben Bernanke.
It is needless argue that it is the non-residential investors who draw the picture where the Turkish stock market is heading into. Therefore, in a broad sense, I here intend to perform an analysis on the changes in net amounts of securities held by them. The chart below depicts the data since the week ending on 20 Dec, right after the biggest graft scandal in the history of Turkey outcropped. Shortly, those investors has remained bearish on Treasury bonds while being indecisive about equities.
Sooner and later we will see a pick-up in interest rates in US which is probably to be followed by a serious hit to emerging markets. This will also end up with increased funding costs for Turkish companies because of the impact on emerging markets from Fed tapering and the economic recovery in developed markets, both of which are tightening the global liquidity. But in Turkey, it is not the only risks arising out of Fed tapering, specifically it has its own kind of political risks which you can not see in any other emerging economies. In my view political risks in the country are not over yet, moreover they are on the rise. What is more, the climate of uncertainty has the ability to badly affect the asset prices because of the current political developments.
