Key insights
- The post discusses the counterintuitive performance of Turkish stock indices (BIST 100, BIST 30) relative to high inflation and Lira devaluation, questioning why they've kept pace with the S&P 500. It suggests that nominal revenue and asset value increases in Turkish companies may be offsetting currency weakness. The performance of actively managed Turkish funds like IIH is also noted. This has a slightly negative influence as it highlights potential risks in emerging markets due to inflation and currency issues.
I’m confused about something in the Turkish market.
I know Turkey has had very high inflation, and the Turkish lira has depreciated heavily, so I would normally expect equity returns in USD terms to look quite poor. But when I look at the last 5 years, BIST 100 and BIST 30 seem to have held up surprisingly well, roughly keeping pace with the S&P 500 in some comparisons even after accounting for the currency decline.
I’ve also noticed that some actively managed Turkish funds, such as IIH, appear to have done even better, which makes this even harder for me to understand.
What explains this? Is it simply that Turkish companies’ nominal revenues and asset values rose fast enough to offset inflation and currency weakness? Or am I comparing the returns incorrectly?
I’d appreciate it if someone could explain what I may be missing.