Foreigners Dump Turkish Local Assets by Close to Record Amounts

Turkish local assets were hit last week by one of the largest bouts of foreign disinvestment in the last five years, Deutsche Bank said on Friday.

The outflow signaled bearish market sentiment towards Turkey, which has seen the lira weaken in recent days, in part due to concern about a flare-up in fighting in Syria's Idlib region, to which Turkey has sent military reinforcements.

The lira slipped 0.2% to 6.0570 on Friday and was on course to close at its lowest level since late May, reported Reuters.

Foreigners sold $632 million in the week ending Feb. 7, including $549 million in local bonds and $83 million in equities, Deutsche Bank said in a note, citing Turkish official data, noting it was the largest amount of foreign disinvestment from local assets since October 2019.

"Looking at flow dynamics since the start of the year, we note negative flow dynamics in every week so far. While the outflows were mainly concentrated to the fixed income market initially, we now also see outflows from equities as well."

The outflow, particularly from the bond market, was even more meaningful given how low foreign ownership is already, it said. With last week's outflows, the amount of domestic debt held by foreigners was down to $14.4 billion, excluding repos, taking the share of foreign holdings to a record low of 9.4%.

Within equities, the share of foreign holdings to market capitalization of the index was close to its all-time low, Deutsche Bank said.