Foreign capital fleeing Turkey hits 2.5-year high on Fed, jet crisis

Having recorded a short-lived rally immediately after the Justice and Development Party (AK Party) regained its parliamentary majority after a five-month hiatus on Nov. 1, assets at BİST dropped 5 percent in value for the whole month, during which the Fed deemed a rate hike more likely than before, attracting investors to assets in the US. Also, Turkey’s downing a Russian jet on Nov. 24 over a border breach at its Syrian border also unnerved investors, with BİST dropping more than 4 percent on the same day.

According to central bank data, foreign nationals sold $1.14 billion worth of BİST stock in November, pushing up their net sales to $1.905 billion so far this year. The November sales are the highest monthly amount after the corresponding figure in June 2013, the month when the Fed first announced the possibility of a rate hike and when, specific to Turkey, nationwide anti-government demonstrations grew starting in İstanbul’s Gezi Park.

Foreign nationals made a net purchase of $2.58 billion in 2014, during which they bought $392 million worth of government bonds. This group of investors has sold $5.9 billion worth of government bond this year so far, of which $405 million were sold in November alone.

Amid a protracted pre-election period, sales of foreign nationals at BİST surpassed their purchases in the months of June, August and September. But October saw a new purchase of $168 million, a move analysts call “profit-taking” just before an election. When the AK Party secured its majority in Parliament on the night of Nov. 1, BİST gained 5 percent in value on a lira basis and 9 percent on a dollar basis.

Quoted by the Hurriyet daily on Tuesday, Murat Barısık, a senior executive at the Ata Yatırım consulting firm, said November saw the greatest exodus from Turkey since the Fed’s announcement in June 2013, which triggered a capital exit from emerging markets.

“The reflection of expectations for a rate hike in the US and most recently the tension with Russia” have shaped foreign nationals’ investment choices, Barısık said.