Stocks in Türkiye are poised to erase their gains since the start of the year, with continued political uncertainty weighing on investor sentiment and anticipation of a key central bank meeting next week. The Borsa Istanbul 100 index trimmed its gains to just 4.9% this week, after hitting a record high of 17% in August amid optimism about interest rate cuts. When calculating the dollar value, the index is actually down 10% since the beginning of the year. As political risks persist and inflation rises, the decline could gain momentum, according to Is Investment analysts. Annual inflation accelerated in September for the first time in more than a year, prompting many economists to lower their expectations for a rate cut. This week’s losses have pushed the index below its 50- and 100-day moving averages, key levels that indicate the possibility of continued decline. Also read: Tension among Turkish investors before the verdict on the opposition leadership. Weekly index movements. The benchmark index rose 1.4% on Wednesday amid a global rally, but it is still down 2.4% this week after posting its biggest drop in two weeks on Tuesday. “After Tuesday’s sharp selloff, investors may be reluctant to try to buy stocks on significant declines,” analysts at ACE Investment wrote in a research note, and “after two weeks of selling, the index is at critical levels.” Turkish central bank meeting Monetary policymakers from the central bank will meet next week, a day before a court hearing on the leadership of the main opposition party. The indictment against Nuri Aslan, the interim mayor of Istanbul, put further pressure on market sentiment on Tuesday. Political tensions rose in March after the arrest of Istanbul Mayor Ekrem Imamoglu, a prominent rival of Turkish President Recep Tayyip Erdogan, days before he announced his presidential bid. This week, Turkish prosecutors also requested official permission from the Interior Ministry to investigate Ankara Mayor Mansur Yavaş, who is also seen as a potential rival to Erdogan. Opposition hearing The market is now expecting a court hearing on October 24 to annul the main opposition party’s congress, which could increase political tensions. The court postponed the hearing of the case in September, leading to a rise in lira-denominated assets. The case threatens to oust party leader Ozgur Özil, who has been leading a nationwide campaign against Imamoglu’s arrest for months. The Turkish Central Bank’s decision on interest rates next week has become more important after inflation rose more than expected in September. Also read: The Turkish Central Bank: Lowering interest rates will not happen automatically or on a predetermined path. Interest rate expectations on the lira. Morgan Stanley reduced its expectations for a rate cut amid the slowdown in the fall in the inflation rate, while JP Morgan revised its expectations for the size of the potential rate cut during the rest of the year to a combined 250 basis points (2.5%) instead of 350 (3.5%). “Investor sentiment on Borsa Istanbul is likely to remain cautiously negative in the near term,” analysts at ICBC Turkey Investment wrote in a research note on Wednesday. “At the same time, fixed income funds continue to attract strong demand, offering relatively high returns with low risks, while gold and silver remain favored by local investors as a hedge against exchange rate fluctuations,” they added.
Türkiye’s shares pared their gains since the start of the year ahead of the central bank meeting
