1Q2019: TUYID- IHS Flow of Funds Report: Mild interest in Turkish equities
Turkish stock exchange lagged behind peers in attracting portfolio flows
The quarterly report published by Turkish Investor Society and IHS provides valuable insides, not available elsewhere into the main players in the Turkish market and how they reacted to valuation and macro-developments.
In its introduction, the report states
Turkey experienced net inflows again, after experiencing net inflows in Q4-18, with all other regions in this comparison also subjected to net inflows over the quarter which is in contrast to the negative trend seen in the previous quarter. Regionally, North America and the UK & Ireland were the largest buyers of Turkish equities with net investments of +$255.1M and +$67.7M respectively. North American investors also increased their exposure to Russia (+$866.9M) in addition to Poland (+$4.5M), while divesting the Hungarian equity market by -$11.7M.
Value investors remain the largest invested holders by style which is composed of Norges Bank and Lazard AM – Value investors also accounted for the largest net outflow for Q1-2019 with the largest detractors being SEB IM and Arisaig Partners (Asia). GARP investors were the second largest buyers in the period which was driven by inflows from Schroder IM, Hermes AM and East Capital AM. The largest net inflows by style emanated from Index investors based in the US being The Vanguard and State Street.
The Turkey BIST 100 index was down -18.1% for the 12-month period ending Q1-2019. The only other index to finish in negative territory was the Russia RTS (- 2.9%) while the Hungary BUX (+11.9%) was the best performing index over the same time frame.
Poland’s WIG20 ended with a +4.6% increase, MSCI Europe increased by +1.2% while the MSCI EFM Europe Mid East Africa added +0.3%.
Inflows and Outflows
Turkey saw a consecutive period of net inflows, although at a reduced rate, driven by North American investors in both quarters.
North American institutions also led inflows into the Russian market while Western Europe investors was the key contributor to Polish inflows.
Investment by Investor Region
The Turkish equity market saw net aggregated increases of +$250,2M across all key investor regions. North America continues to be the largest holder and buyer of Turkish equities (+$255.1M) followed by Eastern Europe albeit this region was a net seller over the quarter (-$3.2M). The UK & Ireland were the second largest buyers of Turkish equity (+$67.7M) over the review period.
Investment by Style
Index orientated investment strategies (+$135,2M) saw the largest increases led by The Vanguard Group (+$63.1M) and State Street Global Advisors (+$19,6M). GARP (+$95,5M) accounted for the second largest inflows driven by U.K investors namely Schroder Investment Management, LTD (+$64.4M) and Hermes Investment Management, LTD (+$24.1M).
Value investors remain the largest invested holders by style (Norges Bank, Lazard AM t al) but accounted for the largest net outflows in Q1. SEB IM and Arisaig Partners (Asia) were the largest detractors.