Let’s start with a quite simple question: What would you consider if you wanted to make a portfolio investment in another country as an investor? The answers are obvious, aren’t they?
First, you would examine whether the return of the security to be invested in is good. As you attempt to invest in foreign countries and you take your money there, no doubt you should get a good return.
You examined, studied, compared with other countries; the interest rate yield is good, even more than good, fantastic. The interest rate, which you can get in 5-6 years in your country, is provided by this country in a year.
The interest rate is good. But what about the fluctuation in the value of this country’s currency? You’ll also examine that. The money you would take is obvious: USD. If USD appreciates higher than the interest rate against the currency of that country, it means that your return will be negative. If you see such a possibility, you reject that investment, no doubt.
Maybe not soon, but probably in the future, the interest rate fluctuations that Turkey experienced in the last 1.5 years, the cause these fluctuations and how portfolio investments showed a bumpy performance as a result will be given as a lecture at economics faculties.
An outflow like last year’s has never been experienced before, according to the data set on foreigners’ equity and government debt security (GDS) investments. Foreigners ran for the hills, especially during the first 10 months of the previous year. Foreign investors sold USD 13.4bn in equity and GDS in this period. Moreover, this shows the net outflow. Outflow stopped in the last two months of the previous year and inflow totaled USD 4.2bn. Thus, last year ended with a net outflow of USD 9.3bn.
The first two months of this year took a mediocre course while the situation changed in March. We know the reason for this.
Foreigners are still on the fence. It’s obvious why they are. We ourselves can’t predict what will be done and when it will be done, let alone foreigners…
The interest rate, which is the cause of inflation’ was increased, the outflow of foreigners stopped, inflow even started on the contrary, foreign exchange (FX) rates rapidly declined when the interest rate was increased… Just as the things seemed to normalize a little, the March operation happened at the Central Bank. The reason for this still hasn’t been fully understood.
Has the interest rate which is the so-called ‘cause of inflation’ been cut since March? No. Have FX rates started to increase again although the interest rate is high? Yes. Then what can we understand from this March operation!
It’s worthy to continue to examine this issue. As we said, this will be taught at economics faculties one day. It is an important issue…