The dollar-based chart in Borsa Istanbul actually points to an illusion, due to the shear in exchange rates opened with the free market rate. The graph drawn with the real exchange rate in the Grand Bazaar, which is valid for foreign exchange exchange, reveals that the losses in the stock market are extraordinary.
The dollar-based peak of Borsa Istanbul on January 3, 2022 is at the level of $ 304.72. There is actually not much of a problem with this data. Because those days were the days when the extraordinary period we still live in the dollar did not start. Therefore, the currency-based chart of the BIST-100 index was an indicator that was carefully followed in terms of at least measuring the real return of the index. However, with the end of March, a serious problem began to occur in the dollar liquidity in Turkey. The Grand Bazaar dollar rate, which has been moving in parallel with the market for a long time, became the place where the demand on the street and the shortage of dollar supply in the market were faced.
While the official and even bank dollar rates were still hovering around 18.90’s, the Grand Bazaar dollar rate suddenly started to rise. The market, triggered by both the demand arising from the payments of some private-public companies and the demand for individual dollars, caused the Grand Bazaar dollar rate to rise to 21 TL for a while. However, due to the squeeze in foreign currency liquidity in the Grand Bazaar and the almost non-existence of new foreign currency inflows to Turkey, this time the bank has caused the dollar rate levels to exceed 20 TL.
The stock market lost more than it appeared on the currency basis
This actually affects not only the foreign exchange markets, but even the stock markets. Because stock investors who want to measure the real return are now trying to do this on the dollar-based BIST-100 index instead of the inflation, whose reliability is much discussed. However, since all charts are based on the dollar rate announced for the Central Bank or the free market, it creates a huge illusion. Today, the dollar-based level of the BIST-100 index, which is calculated with the free market rate, is around 243.43 dollars. In other words, according to the level of $ 304.72 on January 3, 2023, the loss in dollar terms is seen as 20 percent.
On the other hand, when you take the actual dollar rate of the Grand Bazaar, which is the real dollar rate you encounter when you go out to the streets to buy and sell dollars, the level of the BIST-100 index is at the level of 234.9 dollars. Accordingly, the real dollar-based loss experienced in the stock market over the BIST-100 index is 23 percent in the same period. In fact, this margin becomes even higher on days when this gap between the apparent exchange rate and the actual exchange rate is widened.
Until the election, the difference may increase even more.
The answers given to the debate on the question of how much the dollar rate will be until the election will show how important this difference is in the future. Because the general belief is that the government will somehow continue the pressure on the exchange rate until 14 May 2023. However, on the other hand, some believe that the demand pressure, which is the opposite of the dollar, will cause the gap between the two different currencies to widen even more in the period until the election. Considering the estimations written and drawn for the post-election period and pointing to various levels from 26 TL to 35 TL, it is noted that there may be serious differences in the level of BIST-100 compared to the actual dollar exchange rate.
The real illusion is in dollar-based share prices.
Of course, this is not just an index-based situation. The index is just an indicator on this subject. However, considering that the invested stocks can experience much more losses in dollar terms compared to the index, the dollar-based losses on a share basis may be much more than you think. We will reveal these losses in our further analyzes on the basis of shares.
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