Foreign Equity Funds Made Turkish Investors Smile

American-based investment bank Morgan Stanley has published a report on the stock market in the United States. In the report it published, the bank pointed out that a possible decrease in the profits of companies could end the rally in the S&P 500, and recommended especially Asian stock markets and government bonds of some developing countries to investors instead of US stocks.

According to Morgan Stanley strategists led by Andrew Sheets, who shared their views that the tightening financial environment with interest rate hikes may lead to a decrease in the profits of companies in the USA, a decrease of up to 16 percent on average in the profits of the shares in the S&P 500 is possible.

“We believe that the downside risk to corporate earnings in the US is currently present,” the report said. “While a worsening liquidity floor will put downward pressure on stock valuations over the next three months, we expect earnings per share to be disappointing as revenue growth slows and margins tighten further.”

Rise Over 10 Percent in 2023

The rise of the S&P 500 index, which covers approximately 75 percent of the American stock market, has exceeded 10 percent since the new year. The index, which started the year at 3,800 levels, is currently trading at around 4,300 levels.

The US markets, which started the year with interest rate hikes in the shadow of the fight against high inflation, turned the outlook to negative with the bankruptcy of Silicon Valley Bank in March, and then the expectations that the measures taken and interest rates would be increased to a point lower than expected turned the markets back to the positive side and started a rally.

While the rhetoric that there will be no further tightening in the interest rates in particular, has been positively received in the markets, the Fed Watch data prepared by the CME and calculated on the basis of the market data predicts that the interest rates will remain stable with 80 percent probability for the Fed meeting on 14 June.

After all this investment conundrum, the returns of funds carrying foreign stocks make investors smile in Turkey, both due to foreign exchange-based movements and the effect of the positive atmosphere surrounding foreign markets.

Funds Carrying Foreign Shares, Champion of Yield Since the Beginning of the Year

When we look at the returns of the funds traded on TEFAS since the beginning of the year, we see that 9 of the top 10 funds we encounter carry foreign stocks that can be called high. The rally in foreign markets since the new year put a smile on the face of savers investing in funds carrying foreign stocks.

In the 6 months since the beginning of the year, the fund with the highest yield among the funds listed in TEFAS is the AK PORTFÖY NEW TECHNOLOGIES FOREIGN SHARE FUND, traded with the AFT code with 48.39 percent. In addition, AFT is the fund with the highest foreign stock weight in the list.

In the second place is the FOREIGN TECHNOLOGY SECTOR SHARE FUND, traded with the YAY code belonging to Yapı Kredi Portfolio, which is the second fund with the highest foreign stock weight.

An interesting point is the partial decrease in investors’ interest in these funds. Although funds have been among the highest earners in Turkey recently, there has been a general decline in the number of investors.

While the two most profitable funds, AFT and YAY, had an investor exit of approximately 32 thousand, the most popular among the funds is the Blokchain Technologies mixed fund of Istanbul Portfolio. Since the beginning of the year, the fund has managed to double the number of investors by increasing more than 2,000 people.

Portfolio Size Increases While Number of Investors Decreases

No matter how much a decrease is observed in the interest in the funds due to the number of investors, the portfolio size of the funds, in other words the money they manage, increases due to the increase in their returns and the rising exchange rate.

9 foreign stock-heavy funds, which are among the top 10 highest-earning funds since the beginning of the year, showed a portfolio increase of more than 3 billion TL in a 6-month period.

These 9 funds, which managed a total of 7 billion TL in the first trading days of the new year, manage a size of approximately 10.5 billion TL as of the first week of June.

YAY and AFT funds, which are the income champions, undertake 85% of the portfolio size exceeding 10 billion TL in total. The total amount of money managed by these two funds is 8.8 billion TL.

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