Foreigners Cut Their Turkish Stock Holdings to Record Low

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(Bloomberg) — Analysts may be talking up Turkish stocks, but foreign investors aren’t heeding the call.

Non-residents held 45.5% of the market as of Feb. 17, the lowest since the data was first recorded in 2004, figures from Turkey’s shares depository show. As they headed for the exits, foreign investors were net sellers of $857 million of Turkish equities in just four weeks ended Feb. 12.

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The shakeup of the country’s economy management in November spurred a rally in Turkish assets and prompted analysts at foreign institutions including Morgan Stanley and HSBC Holdings Plc to recommend buying Istanbul stocks. Investor inflows spurred by the changes among policymakers proved short-lived, however, and net sales of Turkish equities over the past 12 months have now reached $4.1 billion.

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In June last year, MSCI Inc. warned Turkey that it may end its emerging-market status, citing curbs imposed on equity investors. Since then, Turkey removed a ban on the short selling of stocks in the Borsa Istanbul 30 Index of large-cap companies, recently expanding this to cover the Borsa Istanbul 50 Index. Authorities also relaxed some requirements around margin trading.

“The broader trend in foreign ownership was skewed toward a decline amid accessibility issues, including the shorting-ban and margin trading requirements, despite some easing of these over the past few months,” said Burak Demircioglu, head of International Capital Markets at Istanbul-based Yatirim Finansman. “So it seems just a continuation of that trend and may not be easily fixed.”

He described the purchases of Turkish stocks by non-residents in November and December as “tactical trades.”

Locals Replace Foreigners in Turkey’s Record Stock Market Rally

Retail traders’ increasingly powerful presence in the local stock market also contributed to the dwindling proportion held by foreigners, a trend that intensified since the second half of 2020. Since the end of 2019, the number of active equity investors in the country has jumped more than 70% to 2.1 million, according to figures from the Central Securities Depository of Turkey.

(Adds local investor presence in the last paragraph)

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