Inflation, negative real interest rate and BIST… Due to high inflation and low interest rates, investors turn to the stock market in search of returns. At the end of March, the CPI exceeding 61% and the negative real interest rate of almost 50% by the CBRT, which did not change the interest rates, which was 115%, directed domestic investors to the stock market. The fight against inflation seems to have largely moved from monetary policy instruments to fiscal policy and liraization strategy, so we expect interest rates to remain low in TRY terms. The trend in global prices, the economic model approaches that destabilize inflation expectations and the 115% PPI also show the risks to our inflation in the upcoming period. This may cause the negative real interest position of the TRY to deepen. Since there are no foreign investors, the direction is given by the domestic investor.
BIST 100, inflation, policy rate, real interest rate comparison… Source: Bloomberg
High balance sheet expectations of companies in the inflation environment… Banks’ first quarter balance sheets are expected to be very strong. Accordingly, the performance of the stock market is also positively affected… The current discount situation displayed by the market multipliers shows that banking stocks are also cheaper than the foreign markets. Therefore, the positive situation can continue with the support of good balance sheets. A historical profit announcement is expected in BIST 30 shares, especially in the banking sector. Banks trading at a high discount compared to similar companies are the main dynamics of the rise. While the banks, which are funded cheaply at 14% with the CBRT interest rate, increase the profit potential from core banking activities by giving loans over 25%, the CPI-indexed bond returns also have a catalytic effect on the increasing profit rates in a high inflation environment.
Inflation can also differentiate companies that can reflect rising costs on product prices, manage supply/supply problems, and create a risk strategy with market diversification against foreign demand risks. Ongoing supply problems, production costs and pandemic woes have prompted many companies to diversify their strategy and manage operational and financial risks well. Oil, natural gas and food prices, which have increased significantly with the Russia-Ukraine war, will force companies in this cost/price management and will lead them to inflationary pricing.
Macroeconomic analysis… Increasing energy and food prices are pushing the Turkish economy in terms of inflation and current account balance. When the economic and geopolitical effects of the war that broke out between Russia and Ukraine are taken into account, direct and indirect inflationary effects on oil, natural gas and food prices will also form the basis for price fluctuations in the coming months. Supply shortages originating from Russia may also be in question in this period, because if Europe extends the sanctions against Russia to the extent of stopping direct oil and natural gas purchases, a supply gap that is difficult to replace will occur. As an important importer, we consider the energy deficit and the increase in commodity prices negatively for our economy. This situation will both cause prices to rise and slow down the European economies due to the input deficit, and may suppress Turkey’s export revenues. Turkey has important commercial relations with Russia, Ukraine and the European Union.
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