After reaching a record high in mid-July, Borsa Istanbul has experienced negative closures for the past five weeks. While many factors are being cited for the ongoing decline, it is indicated that recovery may take some time. Here are the reasons for the drop in the stock market and the necessary conditions for recovery…
Following the peak level of 11,250 points seen in mid-July for the BIST 100 index, the market has recorded a selling trend, leading to five consecutive weeks of negative closures. The pressure on the index continued this week as well.
Starting the new week with buying pressure, the index ended the day with a decline of 1.06%, closing at 9,565 points due to selling pressure observed towards the end of the day. After a sharp pullback on Friday and a normalization in news flow, a rebound that was expected on the first day of the week did not materialize.
Additionally, the fact that the index has closed nearly at its lowest level of the day in recent trading sessions has been viewed negatively by analysts.
Moreover, due to the Victory Day holiday on August 30, Friday’s trading will be inactive, extending the settlement periods, which poses an additional risk of creating extra pressure on the index.
130-DAY LOWS REACHED
Today, the index started the day with a slight decline of 0.04%, at 9,561.73 points. In the first half of the day, it gained 0.06%, reaching 9,571.54 points. During the day, the highest level seen was 9,619.46 points, while the lowest was 9,523.25 points, marking a test of the lowest level seen in 130 days since April 19.
RESIGNATION CLAIMS DID NOT REFLECT ON THE MARKET
The impact of the news regarding Treasury and Finance Minister Mehmet Şimşek’s alleged resignation was felt in the index on Friday, but the denial of these claims over the weekend did not result in a positive rebound.
In Integrative Investment’s daily bulletin, it was noted, “On Friday, the effects of the resignation news about Mehmet Şimşek were felt, and it was expected that some sales would be reversed with the announcement that these claims were unfounded over the weekend. However, the index did not distance itself from the pressure ongoing since July, and the declines persisted.”
WEAK BALANCES AND SLOWING ECONOMIC GROWTH AS MAIN CAUSES OF THE DECLINE
On the other hand, signs of a slowdown in economic growth and the onset of the earnings season are seen as the primary causes of the decline.
The weak financial results of the second-quarter balance sheets are putting pressure on the index. The Integrative Investment bulletin noted, “The financial results for the second quarter are not strong. Almost one of the reports that come in every evening shows no real growth. So far, half of the 145 reported balances have not shown real growth. The common feature of companies that have reported strong balance sheets is that they do not apply inflation accounting. Therefore, the decrease in economic growth and the reduction in company profitability can be considered the main driving forces behind the decline in the index.”
IT WILL TAKE TIME
Tacirler Investment also noted in today’s daily bulletin that the ongoing weak appearance in Borsa Istanbul stemmed from macro and political reasons like weak balance sheets, an economic slowdown, and increased geopolitical risks, as well as market dynamics such as a lack of catalysts in the short-term agenda, foreign exits, and a global trend toward risk reduction.
The average target for the BIST 100 index, calculated based on companies’ 12-month target values, is approximately 13,500. This suggests a potential return of about 41% based on the index’s closing on the previous day.
The bulletin expressed hope for a revival in investor appetite if improvements are observed in macro data, stabilization in balance sheets, and a calming of geopolitical risks. However, it was noted that this may take some time.
Additionally, it was mentioned in the bulletin, “During this period, it may be a wise choice to proceed with selective positions in BIST and maintain a low weight of risky assets in portfolios.”
(Source: SOZCU.com.tr)
