May 25, 2024

World stock markets continued to rise in January 2013 with the support of the postponement of the financial cliff risk in the USA, the better-than-expected global growth data and the indicators pointing to the bottom of the recession in the Eurozone.

The increase in the global risk appetite and the expectation that the worst is over has led the global capital to turn to the highly indebted developed countries of the Eurozone more than the developing countries.

The ISE, which won the champions cup in the MSCI developing countries league with a return of 61% last year, closed the month of January with a 1.6% increase, slightly above the average of the developing countries (1.3%), with sales from foreign investors decreasing by nearly 9% in the last week.

Concerns that the Central Bank might tighten its monetary policy harder than expected and Moody’s signaled that it would not raise Turkey’s credit rating to investment grade in the short term were effective in the decline in the stock market.

Let’s leave the past and look to the future… Will the rise in world markets continue? Will Turkish markets continue to be negatively differentiated from the rest of the world? The answers to these questions will be shaped depending on the policies to be followed by the economy management as well as the global conjuncture.

Let’s start with the global conjuncture. In 2013, we continue to foresee a conjuncture with high risk appetite, weak growth and low interest rates.

The developments in the USA and Europe in the past months have reduced the probability of repeating the disaster scenarios that hit the markets in 2011 and 2012 in 2013 as well.

On the global growth front, we maintain our cautiously optimistic view in the short term. January data came well above the expectations in the USA, Europe and China, showing that global growth started to accelerate again and supported the rise in world stock markets.  However, Europe and Japan continue to drag down global growth due to high debt and structural problems.

Therefore , despite the slow course of global growth, we are faced with a new normal conjuncture that will last for many years, in which systemic risks will decrease, interest rates will remain low, and risk appetite will remain relatively high.  

Let’s continue with Turkey. We do not foresee a deterioration in the general outlook of the Turkish economy, which is more sensitive to risk appetite than to global growth, in 2013.

We expect the growth rate to increase from 3% to 4% with the support of the low interest rate environment. Current account deficit and inflation will rise to 7% and 7.5%, respectively, in parallel with the recovery of growth. However, we do not see this as a development that spoils the general outlook. We expect Moody’s to raise Turkey’s rating to investment grade in 2013, despite the cautious messages it gave in a teleconference held at the end of January.

To sum up, we see the sales from foreign investors in the last week of January as a temporary wave rather than a trend change and we do not change our views on the markets . We maintain our long-term structural positive view on the Turkish lira. We do not recommend buying medium and long-term fixed rate government bonds.

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