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The following article appeared in the business daily Dünya on 23 April 2010. Translated from Turkish by Tim Drayton.

The amount of hot money rose by 9 billion dollars in March

by Naki BAKIR

ANKARA – The value of portfolios known as ‘hot money’ in which foreign investors hold for the most part shares and domestic government bonds (DGBs) in Turkey, having fallen by 7.5 billion dollars in February at the height of the political tension fuelled by talk of a ‘coup’, rose at a rate of 11.5% by 9.2 billion dollars in March to 89.4 billion dollars.

The amount of hot money, more than half of which evaporated during the first six months of the global crisis to fall to 43.5 billion dollars, has risen from that date until the end of March by 45.9 billion dollars, nearly reaching pre-crisis levels.

According to calculations made by DÜNYA based on Central Bank and Central Registry Agency figures, most of the increase in the amount of hot money in March was accounted for by shares, which make up the bulk of foreign portfolios. The value of shares owned by foreign investors on the Istanbul Stock Exchange rose at a rate of 15% by 7 billion 735.2 million dollars to 59 billion 419.5 million dollars.

In March, which witnessed a sharp increase in the stock exchange index, the rise in the value of shares contributed towards the increase in foreign investors’ portfolios. Nevertheless, there was also a noticeable if small increase in the amount of shares owned by foreigners. The value of DGBs in foreigners’ portfolios rose at a rate of 7% by 1 billion 423.9 million dollars to 21 billion 878.9 million dollars. The balance held by foreign residents in deposit accounts in Turkey increased at the rate of 0.4% by 34.2 million dollars to 7 billion 937.9 million dollars.

Conversely, there was a decline of 2.7 million dollars in foreigners’ deposits in participation banks to 144.2 million dollars.

Pre-crisis levels have been reached

The value of foreigners’ portfolios in Turkey, which stood at 89.7 billion dollars in August 2008, began to shrink in September of the same year, when capital flows from Turkey speeded up under the influence of the global crisis, and had contracted to 43.5 billion dollars by February of 2009.

The above-mentioned six-month period witnessed a contraction in the amount of hot money of 46.2 billion dollars. The amount of hot money began to increase once more as of March last year. The amount of hot money, which stood at just over 45 billion dollars in the above-mentioned month, rose above 50 billion in April, 60 billion in May, 70 billion in June and 80 million in December.

The amount of hot money, which rose to 87.7 billion dollars at the end of this January, contracted by 7.5 billion dollars to 80.2 billion dollars in February, when operations to do with ‘coup’ plans intensified and political instability appeared to be at its height with serious disputes between the ruling and opposition parties. However, this decline gave way to a rise of 9.2 billion dollars in March, when political tension abated.

Archive of Turkish press translations by Tim Drayton