Foreign Investor Interest in Borsa Istanbul Grows, But Analysts Urge Caution

Foreign inflows into Turkish equities are showing signs of recovery, but experts say it’s too early to declare a sustained comeback. According to Hürriyet finance columnist Zeynel Balcı, Central Bank data reveals that non-resident investors bought $535 million in Turkish stocks over the past three weeks—marking the first uninterrupted inflow streak in a while.

However, analysts stress that the volumes remain modest compared to earlier outflows, and continued foreign and domestic interest is key for any lasting rally in the BIST 100 Index.

Foreign Inflows and Bond Sales Raise Questions

The Central Bank of Turkey (CBRT) reported that foreign investors purchased $173 million in equities during the week ending May 2, while simultaneously selling $1.161 billion worth of government bonds. As a result, their net position for the week was down by $988 million.

Despite three consecutive weeks of stock purchases, analysts caution against reading too much into the trend. “It’s still premature to say foreigners are shifting out of bonds and into equities,” Balcı notes, highlighting weak trading volumes and recent profit-taking in banking stocks.

In contrast, strong performances in select industrial shares suggest that some investors may be rotating their portfolios rather than expanding exposure.

Technical Rebound Tied to Global Sentiment and Valuation

Thursday’s uptick in Borsa Istanbul was fueled by rising global markets and the perception that the BIST 100 had become undervalued after nearing key technical support levels. For this rebound to gain strength, investor interest—especially from abroad—must continue, and market participants will be looking for positive economic signals and sustained global optimism.

Earnings Season Disappoints: “Hard to Find a Good Balance Sheet”

BIST 100 stocks have been under pressure since July 2024, leaving many shares appearing undervalued. However, weak earnings results for Q1 2025 have kept investors on the sidelines. Key stocks posted disappointing figures, especially in the industrial sector, while banking names saw stronger profit growth.

Balcı notes that inflation accounting has distorted earnings figures, and aside from select bank results, “it’s quite difficult to find strong balance sheets.” Despite this, he suggests that long-term investors may find favorable conditions for accumulating positions.

Dollarization Slows, But Reserves Still Under Pressure

One positive development is the apparent decline in dollarization. In the week ending May 2, domestic residents’ FX deposits fell by $1.3 billion to $193 billion. This slowdown is seen as an early sign that the CBRT’s recent rate hikes may be having an effect.

However, the central bank’s reserves remain under pressure. Gross reserves dropped by $2.5 billion to $138 billion, while net reserves excluding swaps fell to $13.8 billion, down from $16.4 billion a week earlier. Analysts note that the CBRT is unlikely to actively intervene in currency markets by selling reserves, as recent declines limit its maneuvering room.

If dollar demand resumes, further interest rate hikes could come back on the agenda, possibly disrupting the fragile recovery in Borsa Istanbul.

Support Levels Trigger a Technical Bounce

The BIST 100 Index recently rebounded from critical support zones. Key support levels are seen at 9,350–9,230 and 9,060–9,000. Initial resistance stands at 9,530–9,580, and a breakout above this range could signal a stronger recovery toward the next targets at 9,800 and 10,150–10,300.

However, analysts warn that resistance levels may trigger renewed selling. “Despite signs of stabilization, it’s too early to declare that the cautious market sentiment has completely dissipated,” Balcı concludes.

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