Local and Foreign Investors Rush Back Into Turkish Equities

By Şebnem Turhan, Ekonomim.com

Summary: A strong rally in Borsa Istanbul since the start of the year has drawn both domestic and foreign investors back into Turkish equities. Investor numbers have surged, market capitalization has jumped by more than TRY 4 trillion, and foreign inflows have exceeded $2.5 billion. While analysts remain broadly constructive on 2026 prospects, they caution that markets may be pricing in good news — including a potential sovereign rating upgrade — too quickly.

Record Highs Rekindle Equity Appetite

Borsa Istanbul has entered the new year on a powerful note, with consecutive record highs reviving interest in equities after a period dominated by fixed-income investments.

The benchmark BIST 100 index climbed to 14,433.15 points in lira terms and 328 in dollar terms, marking new historic highs. Since the beginning of the year, the index has risen 27.26%, while the banking index — a favorite among foreign investors — has gained 23.24%.

Market participants attribute the rally to:

• Expectations of continued policy rate cuts

• A renewed wave of initial public offerings (IPOs)

• A gradual return of foreign investors who had previously reduced exposure to Turkish equities

On Tuesday, however, analysts reported a corrective move after the rapid ascent, with volatility increasing near the 14,500 level. Some experts suggested that short-term foreign inflows may be nearing a pause, though medium-term outlooks remain positive. Many analysts expect new record highs to be tested by the summer at the latest.

Investor Base Expands Sharply

According to data from the Merkezi Kayıt Kuruluşu (MKK), the number of equity investors reached 6.71 million as of February 16, up from 6.51 million at the end of last year — an increase of more than 200,000 investors in just six weeks.

The wave of IPOs has played a major role. Nine companies have gone public since the start of the year, with another IPO scheduled this week.

Market capitalization has expanded significantly alongside the rally. Total market value rose from TRY 17.33 trillion at end-2025 to TRY 21.48 trillion, marking a gain of TRY 4.15 trillion year-to-date.

Foreign interest has also strengthened, with net inflows exceeding $2.5 billion since the beginning of the year.

Equity Funds See Fresh Inflows

Interest has also picked up in equity mutual funds, though at a more moderate pace compared with direct stock investments.

Data from TEFAS show that:

• The number of investors in equity funds increased by 49,708 since the start of the year

• Total investors rose from 1.44 million to nearly 1.49 million

Total assets under management in equity funds expanded from TRY 168.0 billion at year-end to TRY 201.0 billion, an increase of more than TRY 33 billion.

The gains largely reflect the sharp rise in equity prices.

Rapid Pricing Raises Caution

Despite the strong momentum, market experts warn that valuations may have run ahead of fundamentals.

Reports published at the beginning of the year projected equity returns well above the expected year-end inflation range of 36%–41%. Analysts say the rally has been fueled by:

• Deferred demand from last year

• Greater clarity on exchange rate and interest rate expectations

• Optimistic 2026 corporate earnings forecasts

However, some caution that markets appear to be pricing assets as if Türkiye’s sovereign credit rating had already been upgraded — even though rating agencies have yet to act. While expectations of an upgrade persist, experts recommend prudence given the speed of recent gains.

Strong IPO Demand Continues

IPO activity remains robust.

Tourism company Ata Turizm completed its public offering between February 11–13, raising TRY 3.1 billion and achieving a free float of 34.9%. The offering was oversubscribed 5.7 times, attracting total demand of TRY 18 billion.

Chairman Ahmet Serdar Körükçü said proceeds would be used to expand the company’s asset portfolio and support working capital needs.

Another IPO, Empa Elektronik, is scheduled for February 19–20, with a planned offering size of TRY 836 million at a fixed price of TRY 22 per share.

Outlook for 2026

Although short-term corrections are expected, analysts remain broadly optimistic about Turkish equities for 2026. Continued foreign participation, strong IPO pipelines, and expectations of monetary easing are seen as supportive factors.

Still, investors are advised to monitor valuation risks and potential shifts in global risk appetite.  A new attack on Iran catapulting energy prices higher is the most immediate risk. Recent data from agriculture and rents suggest inflation remains stciky, which may compel CBRT to delay its plan to cut rates in March.  Politically speaking, the new Justice Minister Akin Gurlek is expected to attack CHP Ankara mayor Mansur Yavas, who too, may be sacked and even barred from politics.

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