Süddeutsche Zeitung: “Inflation in Turkey is galloping, as is the stock market”

An unexpected development in Turkey. With 80% inflation, the Istanbul Stock Exchange is experiencing an unprecedented boom, with the BIST-100 index up 31% since the beginning of the year. How is this explained?

The German edition of the Süddeutsche Zeitung notes: “A closer look shows that Turkey is not an island of prosperity.”

On the contrary, the explosion in the stock market is a consequence of the crisis tormenting the country, a consequence of galloping inflation. The increase in prices in Turkey is now 80% year on year, at the beginning of the year it was only 20%. The value of the Turkish lira is rapidly falling. A year ago, one dollar corresponded to 8 Turkish liras, today – 17.30 Turkish liras. “Turkish investors are trying to hedge against inflation by buying shares,” said Ulrich Leuchtmann, head of foreign exchange analysts at Commerzbank.

But can the Turkish stock market become attractive to foreign investors? “Lohitmann believes it is likely that foreign investors will also buy Turkish shares, betting on a scenario in which the index rises more than the currency falls,” reports the Süddeutsche Zeitung. – Theoretically, these two balance each other, but in Turkey there are some soft restrictions on the movement of capital. The current regulatory framework makes it difficult for investors to bet on a falling Turkish lira.”



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