Should we invest in 2023?
Amazingly, the Istanbul Stock Exchange exploded last year, tripling in value as foreign investors shunned the Turkish Stock Exchange and most major financial centers collapsed in 2022. As tensions rise during elections and the outlook for Turkey’s economy is poor, could this be a fine? Will the performance be repeated in 2023? Should you invest in Turkish assets on the stock market? Café de la Bourse gives you the answer in this article.
What is the Turkish Stock Exchange BIST30 Index?
The Stock Exchange of Turkey or Borsa Istanbul (BIST) contains several stock market indexes that include the shares of many companies in the country. Among the most popular indices is the BIST30, which includes the 30 largest listed companies by market capitalization.
The BIST30 index gained more than 190% in 2022
Last year, the BIST30 index was among the best performers of 2022 as the stock index gained almost 192%. Since the beginning of 2023, the BIST30 index has lost more than 3%, but on January 12 it lost as much as 16%. Is the current technical model in the Turkish Stock Exchange BIST30 index positive or negative?
Graphical analysis of the BIST30 index
Source: Trade Outlook
After hitting all-time highs in the early days of 2023, Turkey’s main index lost ground before recovering and flirting with highs again before falling again. Since the RSI and MACD are relatively neutral, a double top may be formed in the future, indicating the beginning of a major decline in the price of the BIST30 index.
Why did the Turkish stock market explode in 2022?
One of the most important factors supporting the Turkish market last year is the demand of the Turkish people, who are trying to protect their savings from the effective inflation and the sharp depreciation of the Turkish lira, which recognizes the country.
The Turkish Statistical Institute announced that the annual increase in consumer prices (CPI) for December 2022 decreased to 64.27% from the 84.39% increase recorded in November 2022. Inflation fell for a second straight month in December after hitting 85% in October to a 24-year high, but remains extremely high.
Turkey’s central bank (supposedly independent but heavily influenced by Erdogan) cut interest rates in 2022 despite high inflation to support Turkey’s economy, the country has already cut rates by 17%, 14% in 2021. Key rates fell from 14% to 9% in 2022, which clearly impacted the Turkish lira, which hit historic lows in 2022 and lost more than 30% for the year. The currency continues to lose value in 2023.
Thus, at a time when the government is opposed to holding foreign currencies, the decrease in the value of the local currency on an international scale, as well as the sharp increase in inflation, have had a strong impact on the purchasing power of households. The local population supported the strong rise of the Turkish Stock Exchange in 2022 by investing heavily in Turkish stocks.
Turkish Stock Exchange: In 2023, everything could be very different
The electoral context is one of the key changes of this new year, adding new uncertainties to an already fragile economic and political context.
This year, the presidential and legislative body elections will be held on May 14, 2023, and many are wondering whether Recep Tayyip Erdogan, who has been in power since 2003, will be able to stay in power for the next 5 years and continue his unusual economic policy.
Therefore, this election meeting is of decisive importance for the future of the country and the solution to the economic crisis. As we can see, the Turkish lira is still under pressure at the beginning of the year, which does not help the purchasing power of households.
Should you invest in the Turkish stock market in 2023?
Foreign investors have several reasons to consider Turkey as a long-term investment destination.
The country’s economic prospects are supported by favorable demographics, with a relatively young and growing population of 85 million. Moreover, Turkey is well positioned to take advantage of export opportunities to expand Middle Eastern markets, as exports play an increasingly important role in the country’s economy.
However, the macroeconomic future is more uncertain, with both domestic and international economic concerns and local currency risks, not to mention increased uncertainty in the run-up to elections, with domestic corporate earnings at risk. Thus, it seems impossible to maintain the current trajectory of the Turkish market this year.
Image source: Freepik
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