"Why is BIST Close to Declines Rather Than Global Increases?"

The Asymmetrical Relationship Between BIST and Global Markets

Borsa İstanbul (BIST) exhibits an interesting behavior in response to movements in global markets. Particularly, while BIST shows limited increases when global stock markets rise, it reacts sharply during downturns, which raises questions for investors. So, what are the underlying reasons for this situation?

Limitations in Market Structure

BIST is characterized as a relatively small market. Liquidity is limited, and the trading volume is quite narrow compared to large global markets. Therefore, upward movements progress slowly and cautiously, while downward movements occur suddenly and swiftly. Consequently, BIST, which has minimal impact from large purchases, can quickly retract due to sudden sales.

Decline of Foreign Investors

The weight of foreign investors in BIST is also an important parameter. The foreign investor share, which was around 60% before 2020, has now decreased to approximately 36%. This situation restricts the reflection of positive movements in global markets on BIST. The decrease in major players leads to an inability to fully benefit from global positive momentum.

Short-Term Investor Psychology

Looking at the dominant investor profile in BIST, it is generally observed that movements are short-term and liquidity-focused. This situation, combined with the limited participation of long-term institutional investors, decreases the potential of BIST to reflect rallies on Wall Street. However, during selling periods, the short-term reflexes of investors tend to quickly pull the index down.

Macroeconomic Factors

High interest rates, inflation, and increasing geopolitical risks in the Turkish economy limit investors' risk appetite. During rally periods in U.S. and European stock markets, concerns about local risk premiums and the value of the TL prevent BIST from responding adequately to these movements. However, during global selling periods, the flight to safety reflex kicks in immediately.

Sectoral Effects and the Importance of Psychology

The composition of BIST 100 consists of sectors sensitive to foreign exchange income, such as banking and energy. These sectors provide limited support when the overall market is positive, while during downturns, due to their weight, they can lead to sharp declines in the index. While BIST responds limitedly to global rallies, it is rapidly affected negatively during global sell-offs due to panic.

The character of Borsa İstanbul presents both opportunities and risks for investors. Developing strategies to benefit from global rallies and create opportunities during downturns is critically important.