Commentary on the exchange rate and Borsa Istanbul

TURKEY - In Brief 22 Feb 2023 by Atilla Yesilada

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I usually express my market views under the alias of Cosmic Strategist in our Weekly Reports. These are not investment advice in any shape or form, but the product of my desire to distill our work on politics and economy to the price discovery efforts for markets. Lately, Cosmic Strategist has been sent on a mandatory sabbatical, because there is too much to cover at the politics front, while there are too few markets left free of government oversight to comment on. Yet, a change in the wind is in the air, as Reuters today reported that “Turkey's central bank used $7 billion of reserves in the last two weeks to help steady the lira in the aftermath of devastating earthquakes, and reserves could remain under pressure in the weeks ahead, bankers said”. (link here) I want to answer the question of whether the rise in FX demand is the beginning of the end, i.e., the initial stages of a currency event I and Murat had discussed extensively in our research. The second change pertains to the national stock exchange, Borsa Istanbul henceforth, which had the distinction of being the only “free market” escaping the bear hug of government authorities. It is now firmly regulated but with a view on making sure stock prices go up in linear fashion. Regarding Borsa Istanbul I want to answer the related questions of whether it is investable for foreign financial investors and whether it is heading for a historic rally or a massive crash. The currency market has been in doldrums since last November or so, as evidenced by CBRT’s ever so desperate attempts to defend the implicit dollar/TL peg with non-market interventions, which simply amount to ever-tightening capital controls. Thanks to...