Foreign Portfolio Rebalancing: Flight from Equities, Rally in Bonds

Amidst fluctuating global risk appetite and the repricing of local yields, foreign investors have sharply shifted their portfolio balance towards the bond side, accelerating the exit from equities.

Foreign Weight in Borsa Istanbul Diminishes

As of last week, the tendency of non-residents to reduce their assets in Borsa Istanbul gained strength, leading to a notable decline in equity stock. This shift in risk perception by foreign investors directly impacted market dynamics.

■Foreign investors executed $185.9 million worth of equity sales last week.

■The equity stock fell from $41.39 billion to $39.56 billion.

■This outflow confirms the caution of foreign ratios regarding TL-based assets.

Safe Haven Amid Risk Aversion: Government Bonds

Contrary to the selling pressure from equities, foreign capital showed a shift towards fixed-income securities. While Government Domestic Debt Securities (DİBS) were the main items attracting demand, the opposite picture emerged for corporate bonds (ÖST).

■There was a net purchase of $164 million on the DİBS side.

■Foreign DİBS stock rose from $17.68 billion to $17.90 billion.

■Non-Government Sector Issuances (ÖST), however, faced $129.9 million in sales.

■ÖST stock declined from $4.02 billion to $3.88 billion.

The shift in portfolio balance from equities to bonds represents a classic risk management strategy during periods of increased market volatility. However, the equity outflow of $185.9 million signals a potential struggle for domestic investors to offset foreign selling. Conversely, the buying in government bonds indicates that interest rates—critical for determining long-term borrowing costs for banks and corporations—remain attractive in the eyes of foreign investors. This capital movement serves as a warning that the pressure on commercial loan volumes may persist and funding costs could remain volatile.