The rally back to orthodoxy ended quickly.

TürkiyeIn some key emerging markets, including Turkey, the rally triggered by the shift towards market-friendly policies is already showing signs of fatigue. The US-based financial agency Bloomberg wrote that the foreign portfolio inflow into emerging markets (EM) that started the year with great enthusiasm was reversed at the end of June. The promise of a “return to orthodox policies” in emerging markets led to a resurgence in foreign investment flows. Not only in Turkey, but also in several developing countries (GOÜ), governments have vowed to remain loyal to traditional economic policies.

APPROACH WITH DOUBT

According to Bloomberg, once the initial enthusiasm waned, promises seemed to float, and the rebound triggered by the shift towards orthodox (traditional and market-friendly) policies in some major emerging markets is already showing signs of fatigue. According to Bloomberg’s analysis, the question marks for foreign investors almost nowhere seem bigger than in Turkey. While benchmark interest rates continue to rise in the US and Western Europe, the days of easy money when foreign investors were eager to pour money into emerging markets are over. However, the promise of normalizing economic policy in many markets, from Egypt and Turkey to Nigeria and Argentina, has raised investor interest in recent weeks. President Tayyip Erdogan, after his re-election, handed over the reins of the economy to the advocates of rational policies. The new rhetoric signals a return to normalcy of the unorthodox policies blamed for runaway inflation and the outflow of foreign capital. However, Treasury and Finance Minister Mehmet Şimşek has already stated that he will follow a measured approach while resorting to traditional policies.

“Investors should keep an eye on Turkish assets”

■Bloomberg“Investors should be skeptical of reform commitments because real reform takes time and commitment,” said Adriaan Du Toit, London-based director of emerging markets economics research at AllianceBernstein. Furthermore, it is more difficult to achieve them in a weak growth environment.” Hasnain Malik, a strategist at Tellimer in Dubai, said: “The turnaround is slower than some investors expected in the short term. If long-term investors are considering reinvesting in Turkish assets, they should be aware of the risks of the permanence of the change in direction.

Pending inflows of foreign funds

■ TLAs the devaluation continues with a controlled devaluation policy in Turkey, foreign investors are expected to invest in Turkish assets, taking advantage of the high exchange rate. However, it is claimed that the inflows of foreign funds were suspended after the Central Bank (CBRT) raised the policy rate below expectations. According to CBRT data, foreigners made the largest purchase of 2023 with a share of 313.4 million dollars in the week of June 16. The stock of foreign shares was $23.100 million as of June 16, while the participation of foreigners in the stock market was located at 29.12 percent.