Istanbul’s bourse sees a sharp increase in outflows as political uncertainty increases

ANKARA (Reuters) – Foreign investors took a net $980 million out of the Turkish stock market in January-March, with a third of that leaving as political tension rose in the second half of March, the head of the market watchdog told Reuters. That compares with a net inflow of $513 million in the last four months of 2007, following an August sell-off in emerging markets. Capital Markets Board (SPK) Chairman Turan Erol told Reuters $329 million left the stock market between March 14 – when a prosecutor launched a case aimed at closing down the ruling Justice and Development Party (AKP) – and the end of last month. «Starting in the second half of March, both yields and foreign movements were negatively affected by the political uncertainty,» he told Reuters in an interview. The main Istanbul stock index stands about 25 percent lower than it ended last year – one of the worst performers in emerging markets – but has risen some 10 percent from lows seen at the end of March. A large current account deficit – financed largely by foreign investment – as well as uncertainty over the AKP closure case has meant Turkish assets have been punished more than other emerging markets. Erol also said that the foreign-exchange liabilities of 216 stock market-listed non-financial companies did not pose a problem, echoing comments from Economy Minister Mehmet Simsek last week. Erol said non-financial listed companies had a combined open position of $10.7 billion as at June last year, compared with $8.3 billion at the end of 2006. «The companies’ open positions (foreign exchange-denominated liabilities minus FX assets) as a ratio of total assets was 8.9 percent at the end of 2006 and rose to 10.4 percent at the end of June 2007. We’ve looked at the ratios of open positions to exports of companies with foreign-exchange open positions and companies have exports 1.4 times their open positions,» he said. «These debts are long-term, I’m not pessimistic about this,» he said. «We don’t see a problem when it comes to listed companies’ debt.» Erol also sounded optimistic about the outlook for initial public offerings, some of which have been delayed because of poor market conditions. Fixed-line operator Turk Telekom is due to be listed in May in a privatization deal. «As long as uncertainty over non-economic issues doesn’t last long, we shouldn’t see a negative impact on IPOs,» he said.

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