TURKEY: Funds Flow Analysis

Source: Gedik Invest

In the week of June 27, several key financial indicators stood out:

• A USD 1.8 billion decrease in net reserves excluding swaps

• A USD 305 million purchase of government domestic debt securities (GDDS) by non-residents

• A USD 677 million increase in FX deposits

According to the CBRT’s Analytical Balance Sheet, as of July 2, net reserves excluding swaps increased by USD 9.1 billion. The week’s developments can be summarized as follows:

Deposits and Currency Composition

• Parity-adjusted FX deposits increased by approximately USD 677 million, driven by USD 728 million in corporate purchases, despite USD 51 million in individual sales

• Since early May, FX deposits have declined by roughly USD 2 billion

• FX-protected deposit (KKM) balances decreased by TRY 15.5 billion (USD 0.45 billion) weekly, to TRY 543.8 billion

• Since its August 2023 peak, KKM unwinding has reached TRY 2.9 trillion (USD 122.9 billion)

• The share of FX deposits + KKM in total deposits declined to 40.4% (from 40.9% a week earlier), down from a peak of 68.4% in August 2023

• TRY deposits rose by TRY 352 billion in a week, reaching TRY 14.3 trillion

Loans and Credit Growth

• FX loans rose by USD 1.6 billion, bringing the total to USD 191.1 billion

• Since end-March 2024, FX loans have increased 41.8% (USD 56.5 billion)

• On an annualized 13-week average basis:

  • Commercial loan growth accelerated from 21.1% to 23.5%

  • Consumer loan growth increased from 36.9% to 43.6%

Foreign Portfolio Inflows

• Non-residents recorded a net USD 305 million GDDS purchase

  • GDDS stock rose to approximately USD 11.9 billion

• Equity markets saw USD 248 million in net foreign inflows

  • Equity stock increased to USD 28.6 billion

• Eurobond market recorded USD 279 million in net inflows

  • Total Eurobond stock held by foreigners is near USD 113 billion

CBRT Reserves and Balance Sheet Trends

• Gross reserves declined to USD 154.4 billion from USD 155.7 billion

• Net reserves fell by USD 1.7 billion to approximately USD 46.4 billion

• Net reserves excluding swaps decreased by USD 1.8 billion to USD 28.4 billion

• From Feb 14 to May 2, net reserves excluding swaps fell USD 57.6 billion, then rebounded by USD 21.7 billion over the following 6 weeks

• In the past two weeks, net reserves excluding swaps declined again by USD 7.1 billion

• The lowest point for net reserves excluding swaps was -USD 65.5 billion at end-March 2024

As of July 2, based on the CBRT’s balance sheet (first 3 business days of the week):

• Estimated gross reserves rose by USD 8.4 billion

• Net reserves rose by USD 9.7 billion

• Net reserves excluding swaps rose by USD 9.1 billion

• A large portion of this recovery occurred on Monday, June 30

Fund Market Developments

• The Money Market Fund (MMF) size increased by TRY 4.5 billion, staying above TRY 1 trillion

  • As of March 14, MMFs stood at TRY 1.42 trillion

• Under the Hedge Umbrella Fund, MMFs rose TRY 400 million in the week to reach TRY 957.1 billion

• After a TRY 500 million contraction post-mid-March, MMFs and hedge fund assets have returned to earlier levels

• FX-denominated mutual funds grew by USD 1 billion during the week to reach USD 59.8 billion

  • Up from USD 25 billion at the start of 2024

• Including investment funds, the dollarization ratio declined from 42.3% to 41.9% (was ~59% at the start of 2024)

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