As the Turkish economy navigates through traditional monetary policies and currency restrictions, domestic investors are setting their sights on international markets, particularly the booming U.S. technology sector. This strategic shift has led to unprecedented growth in Türkiye’s foreign portfolio investments, with households and brokerage firms playing a key role.
How much foreign portfolio investment increased in Türkiye?
- Record growth in international investments: Turkish investors have increased their foreign portfolio investments by 32.75% year-on-year, reaching a historic high of $4.05 billion in the second quarter of 2024, according to the Central Bank of the Republic of Türkiye (CBRT). The bulk of these investments have been directed towards U.S. technology stocks, which have seen a remarkable rally, particularly in companies like Nvidia.
- Household investment patterns: Turkish households have been particularly active in this trend, with their investments in foreign stocks rising by 29% and in bonds by 36.5% compared to the same period last year. Despite the overall increase, there has been a notable shift from bonds to stocks, with households reducing their bond holdings by 9.6% since the beginning of the year while increasing their stock investments by 39.25%.
- Brokerage firms follow suit: Brokerage firms have also seen significant increases in their foreign investments, with a 56.6% rise in stock investments and a staggering 143.3% increase in bond investments in the second quarter of 2024. These firms are capitalizing on the robust performance of US tech stocks, which are leading the global markets.
Why Turkish investors eye US tech stock?
The drive towards US markets, particularly the tech sector, is not just a passing trend but a strategic move for Turkish investors. With 86.6% of stock investments and 64.1% of bond investments directed towards the U.S., this shift highlights the growing importance of international diversification for Turkish investors. As the domestic economy faces challenges, the pursuit of returns abroad, particularly in high-performing sectors, is likely to continue.
Between the lines: While this trend offers potential for higher returns, it also underscores the reliance on foreign markets for economic gains, raising questions about the sustainability of this approach in the long term.
