Target Holding/Gokalp: Capital Inflows May Accelerate in the Second Half of the Year
Forex - As global markets focus on next year's inflation and growth dynamics, Dr. Namık Kemal Gökalp, Chairman of Hedef Holding, stated that economic stability will increase with the continuation of the Central Bank of Turkey's tight monetary policy and the ongoing persistent decline in inflation, and shared his expectations for 2025.
With presidential transition in the US, global central banks undergoing interest rate cuts, and geopolitical developments, the year 2025 is expected to be quite dynamic for financial markets. Dr. Namık Kemal Gökalp indicated that economic stability and predictability will rise for Turkey in 2025, sharing his expectations for the new year.
“The political transition following Donald Trump’s election victory in the US, along with political turmoil in countries like France and Germany, reaffirmed that the US economy would remain resilient compared to Europe. Although the strong stance of the dollar may create pressure especially for emerging markets, Turkey could experience a positive differentiation with the continuation of its tight monetary policy. Of course, the Fed's actions will also be a determining factor. In the US, lower growth and sticky inflation may be observed due to expected tariffs.
Another significant factor will be China’s trajectory and the policies the US will impose on China. As Europe struggles with low growth and high budget deficits, China also faces the threat of entering a prolonged slowdown cycle, similar to Japan.
“Capital inflow may accelerate in the second half of the year” Looking domestically, while the Central Bank of Turkey signaled it would continue with interest rate cuts in its last Monetary Policy Committee meeting, it highlighted the need to maintain a tight stance, exhibiting a hawkish approach above market expectations. This suggests that there will be continued determination in combating inflation and a real appreciation of the Turkish lira. In light of these developments, we believe Turkey could positively differentiate itself among emerging markets.
Meanwhile, as capital inflows into Turkey continue, the attractive yields of the Turkish lira will keep reserves strong. Assuming the current policy interest rate is around 64.8% annually in compound terms, our real interest rate stands at 9.3%, significantly differentiating us from other emerging countries. Particularly after the second half of the year, issues such as the Central Bank possibly opening swap channels could arise. This would imply an acceleration of capital inflows for Turkey and create a positive impact on Turkish assets. As the attractiveness of money market funds remains, we could also see a significant acceleration in the stock market in the second half of the year due to both recovering balance sheets and increasing interest from abroad.
The interest rate cut cycle could serve as a catalyst for the stock market. Alongside all these evaluations, our group company Info Investment's 2025 Strategy Report also provides an important perspective for both domestic and foreign markets.
The report emphasizes that global central banks are expected to continue their interest rate cut cycles, with a balance in inflation and a slowdown in growth. For Turkey, a 3% growth and an inflation rate around 28% are projected for 2025.
Additionally, the report indicates that foreign investors who have been profiting from high-interest rates during the interest rate cut cycle in Turkey could accelerate their transition into riskier assets. Moreover, the potential rating upgrades by credit rating agencies, expectations of opening swap channels, the lifting of the short-selling ban on BIST 50, and the anticipated pullback in CDS could all act as catalysts within the BIST. In this context, the year-end target for the BIST 100 index is set at the level of 14,500.”