Turkey’s Monetary Policy Boosts Stock Exchange with Resumed Short-Selling

Türkiye’s financial landscape is undergoing significant changes, thanks to the new monetary policies introduced by Finance Minister Mehmet Simsek. These changes are evident in the stock exchange surge, the return of short-selling transactions, and a drop in credit default swaps (CDS) below 250 basis points, all indicating a positive trajectory for the country’s economy.

The five-year credit default swap (CDS) rate in Türkiye has dropped below 250 basis points, a milestone not seen since February 2020. This reflects a steady decline from its peak of 908.4 basis points in June 2022, signaling increased confidence in Türkiye’s economic program and achievements.

Major credit agencies like Moody’s, S&P, and Fitch Ratings have also upgraded Türkiye’s ratings, citing significant stabilization efforts. This move bodes well for the country’s economic outlook and could potentially open up easier access to external financing.

The Borsa Istanbul (BIST) stock exchange has seen significant growth, with the BIST 100 index reaching 10,081 by the end of the trading week. This 34.9% increase from last year’s levels shows a healthy appreciation of 4.4% in the past week alone. The lifting of short-selling restrictions further signals a more confident market environment, following the Market Board of Türkiye’s decision to end the restrictions in January 2025.

In the fight against inflation, Türkiye has maintained interest rates at 50% for eight consecutive months as part of its disinflation program. Despite a slight uptick in inflation in November, expectations are high for an interest rate cut cycle starting in December, as predicted by global financial institutions like Morgan Stanley, JP Morgan, Citigroup, and others.

Key drivers behind these positive changes include improvements in the balance of payments, record-high foreign exchange reserves, and normalization efforts by economic institutions such as the Central Bank of the Republic of Türkiye (CBRT). These factors have boosted market confidence and increased foreign interest in Türkiye’s assets, leading to reduced borrowing costs.

Overall, these developments paint a promising picture for Türkiye’s economic future, showcasing the positive impact of the government’s monetary policies on the country’s financial stability.