No changes expected in the Central Bank's game plan

The BIST 100 index, which has experienced a 7.35 percent loss since the Israel-Hamas conflict began, fell by 3.36 percent yesterday. Although the conflicts are not the sole reason for the decline in the indices, the fluctuations in pricing, along with the depreciation of the TL against the dollar, have turned eyes toward the Central Bank. Experts emphasize that there is no turning back from tightening.

The escalating tension and uncertainty in the Middle East continue to negatively affect TL assets. The dollar/TL exchange rate exceeded 28 liras, reaching a new historical peak, while Borsa Istanbul indices are experiencing rapid losses. Gram gold prices broke a record during the day, exceeding 1767 liras. Since October 16, losses in some major company stocks have exceeded 3-month TL deposit interest rates, and the balance sheet period is awaited. While all this is happening, the Central Bank will hold its October Monetary Policy Committee meeting next week. Following last month's meeting, expectations for a further 5-point hike in October had formed. Experts emphasized that the conflicts would not lead to major changes in monetary policy, and that the real concern is the impact that the war would have on pricing if it were to spiral out of control.

CRITICAL SUPPORT LEVELS ARE BEING MONITORED

In the ongoing conflict environment, the events of the previous night further increased tension in global markets. Borsa Istanbul indices were already following a highly volatile course, and losses increased yesterday. Following the wave of selling that spread to all indices, the BIST 100 index completed the day with a 3.36 percent decline at 7842 points. Technical analysts note that volume and momentum are weak and that the 8000 and 7900 levels stand out as important support zones during declines. On the other hand, it is stated that the 9-10 thousand point targets given for the year-end BIST 100 index are now distant.

While Borsa Istanbul indices left the first quarter of this year behind with losses in the shadow of the major earthquake disaster, they could not perform strongly in the second quarter due to the uncertainty of the election atmosphere. The BIST 100 index finished the first quarter with a 12.64 percent loss, the tourism index with a 29.16 percent loss, and the electricity index with a 29.15 percent negative return. While the best first-half performance was in the trade index, which experienced a 3.27 percent loss, losses of 10.73 percent in banking, 11.17 percent in industry, and 14.12 percent in transportation drew attention.

LOSSES IN INDICES DEEPENED

The BIST 100 index, which managed to recover its losses at the end of the first half of the year, provided a 4.54 percent return at the end of 6 months compared to the end of last year. However, it remained in the shadow of high inflation. Other indices also managed to finish the first half slightly positive. The most productive quarter was the third quarter. The new economic management, signals of a return to traditional monetary policy, and the hope for foreign investor inflows created a strong recovery in the indices. While the BIST 100 index provided a 51.29 percent return at the end of 9 months, the IPO index drew attention with its 106.78 percent rise. Tourism and electricity indices also compensated for their first-half losses and achieved double-digit gains.

1.84 BILLION LIRA MARGIN CALL

However, with the start of the Israel-Hamas conflict, the indices turned negative. In the 8 business days from October 6 to yesterday, the BIST 100 caused a 7.35 percent loss for its investors, banking 6.77 percent, industry 7.61 percent, transportation 9.36 percent, electricity 9.53 percent, IPO 8.50 percent, and the BIST ALL index 8.35 percent. In addition to the uncertainty brought by the conflicts, the decrease in hopes for foreign investors, the increase in TL deposit interest rates, and margin calls on leveraged transactions caused this loss to deepen and Borsa Istanbul indices to experience greater losses compared to global markets. According to Takasbank data, margin calls have reached 1.84 billion liras since October 6.

WHAT STEP WILL THE CENTRAL BANK TAKE?

These developments have made the Central Bank's October MPC meeting next week much more critical. The new management of the Central Bank increased the policy rate by 2150 basis points in 4 meetings, from 8.5 percent to y

News Source: 12punto