Economy in Turkey: Reasons for sharp decline in Istanbul Stock Market

The best-performing investment instrument of the year, the stock market, has recently experienced sharp movements. As of December, the stock market, which had been moving below the 8,000 point level, witnessed significant declines on Wednesday. After dropping to the level of 7,529 points, it rose by 3.77% on Thursday, reaching back above 7,800 points. So, what is the reason for the sharp movements in the stock market?

This concerns everyone investing in the stock market. Borsa Istanbul is going through dynamic days. So, what is the reason for the sharp movements in the stock market?

An expert has explained the questions related to the topic as follows:

“The stock market has been the best-performing investment instrument of the year. Will we see rises at this level again? Yes, but the policies of the US Federal Reserve and the economic management’s policies domestically will be effective.

We see the positive effects of the Central Bank’s reserves reaching historic highs and the Banking Regulation and Supervision Agency’s (BDDK) inflation calculation decisions for banks and financial institutions in the face of inflation.

‘WE CAN SEE ACTIVE MOVEMENTS IN THE STOCK MARKET’

In the case of such positive news flow, we will see upward movements in the index, especially after surpassing the 7,850 level, reaching levels above 8,000 points. The end-of-year movement will also be included in this. Since 2024 is an election year, we can see active movements in the stock market.

WHAT IS THE REASON FOR THE SHARP LOSS IN THE MARKET?

The reasons for the sharp losses in the stock market can be attributed to global influences, the Israel-Palestine war and its human dimension, the risk of facing a Covid-like epidemic spreading from China to Europe, Fed uncertainty, and the density of public offerings at the end of the year. The most important factor is also the increase in interest rates by the Central Bank, along with the increase in deposit interest rates, leading to a shift of some of the money to deposits.

HAS THE MONEY EXITED THE STOCK MARKET AND MOVED TO DEPOSITS?

Yes, some investors in the stock market are directing their money to risk-free assets. It is possible to say that the money exiting the stock market is moving towards deposits and gold. Currently, when we look at investor portfolios, 40% is in stocks, 20% in gold, and the remaining portion is in cash, protecting itself.

WILL WE SEE A PEAK IN THE NEW YEAR?

A closing above 8,000 points at the end of the year will be important for the stock market performance. If the level of 8,050 points is surpassed, it can bring a new roadmap.

HOW DOES THE CENTRAL BANK’S INTEREST DECISION ON DECEMBER 21 AFFECT THE STOCK MARKET?

The Central Bank will announce its interest rate decision. It may increase interest rates because Deputy President Cevdet Yılmaz mentioned that we will clearly see a retreat in inflation in 2026.

The Central Bank is showing with its interest rate steps that it is in a tight battle against inflation. If we anticipate that we will see the highest inflation in January due to factors such as the rise in minimum wage, then the base effect will come into play, and the high trend may continue. If we anticipate a downward trend in inflation towards the end of 2024, another interest rate hike may come from the Central Bank.”