Foreign investors demonstrated a keen interest in Turkish assets last week, with official data indicating they made acquisitions valued at $1.45 billion (TL 42.13 billion) – the most substantial influx since July 2017.
This surge in investment followed a series of aggressive interest rate hikes, which reignited interest from overseas stakeholders in recent months.
Foreign investors added a net $891.4 million in Turkish domestic government bonds in the week to Dec. 8, the highest weekly inflow level since August 2017, the central bank data showed on Thursday.
It said inflows from foreign investors into Turkish stocks climbed to a net $562.4 million, the biggest weekly amount since November 2020.
Türkiye's new economy administration shifted to more conventional policymaking after President Recep Tayyip Erdoğan won reelection in May and embraced aggressive monetary tightening to cap strong domestic demand and stem double-digit inflation.
The government has also sought to rebuild foreign exchange reserves and boost investments and exports to improve the current account balance.
The central bank has raised interest rates by 3,150 basis points since June, when Erdoğan appointed former Wall Street banker Hafize Gaye Erkan as its governor. It has hiked its policy rate by 500 points in each of the last three months.
Amid the improving international sentiment, the cost of insuring Türkiye's debt against default narrowed to a nearly three-year low on Thursday, data from S&P Global Market Intelligence showed.
Seeking to boost confidence in the policy shift, widely respected Treasury and Finance Minister Mehmet Şimşek, also appointed since the elections, this week held investor meetings along with the central bank's Erkan in Spain.
Erkan is set to hold the bank's first investor day meeting in New York on Jan. 11.
Central bank officials told Reuters in late November that Türkiye was seeing an inflow of funds to the lira from large corporate investors based on the West Coast of the United States and that talks with foreign funds indicated such inflows would continue.
Türkiye tapped two- and 10-year benchmark bonds last week, attracting clear interest from foreign investors for the first time in years, bankers said.
Türkiye's five-year credit default swaps (CDS) hit 300 basis points by mid-morning Thursday, from 316 basis points at Wednesday's close, and the narrowest since February 2021. A narrow CDS is an indicator of an anticipated lower risk of sovereign default.
Thursday's data also showed that the central bank's total reserves rose nearly $1.23 billion last week to hit a fresh record of $141.4 billion, bringing the increase since June to almost $43 billion.
The gross foreign exchange reserves jumped by nearly $1.28 billion to $94.51 billion in the week to Dec. 8, up from $93.23 billion a week earlier.
The bank's net international reserves rose $3.4 billion to $38.15 billion, hitting their highest level since Jan. 3, 2020, when they stood at $40.98 billion.
Reserves have rebounded since early June – just after the presidential elections – when they had fallen to minus $5.7 billion, their lowest since data publication began in 2002.
Once adjusted for outstanding swaps, the net forex reserves stand at around minus $41 billion-$42 billion. That is down sharply from a level of minus $62 billion before the May elections.
