As Erdogan seems to have prevailed over the opposition heading into the second round of the presidential election, the BIST saw massive outflows over the last two days. The stocks which were bought by foreign investors like KOCHOL, SISE, EREGL, are seeing the biggest outflows, and losing the most right now.
This shows a loss of investor confidence, investors are scared that Turkey will finally have the crisis they have long been averting.
This crisis could come in many ways, the way is a lack of reserves, simply running out of cash. The country's cash reserves are at the lowest since 2006, and most of them are borrowed by swap agreements with commercial banks.
The rates at which the country borrows it much higher than the rate at which it lends.
The Central Bank has been plugging these holes for a long time, but a reckoning might have finally come. Erdogan has been using political leverage to find funds for a long time, Russia funded the TCMB for a while, now the latest allies of Erdogan are the gulf countries, Saudi Arabia recently deposited 5 billion into the TCMB.
As foreign investors pull their funds from Turkey, the markets are likely to trend down for a while, the government could try to stop this downtrend by cutting rates further, but the outflows by institutional investors are likely to take a little time, so Turkish equities are likely to continue this downtrend for a while.
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