Friday, December 10, 2010

More on today's growth

A reader asked the following question to my most recent post on 3Q growth:
if Turkish growth is strong why is the lira and bourse down?
This is a valid question, to which the simplest answer would be: I have no idea what I am talking about. Unfortunately, it is a bit more complicated than that:

First, it is expectations versus realizations that matter more than the inherent meaning of any data, at least in the short run. The Joker knew this as well, albeit in a very different context...

Having said that, the impact of data on markets are never that strong in Turkey. This has been even more true recently, when Turkish assets are just flowing with the global current....

But having said that:), there are some important differences between Turkey and peers... For one thing, the lira has been performing worse than its peers of late, which I believe, is largely due to the Central Bank's recent measures taking their toll. The overnight interest rate plunged in the last couple of days from 6.5 percent to around 3 percent:
This probably triggered (and was triggered by) foreigners selling off, the lira losing value as a response and finally the stock market plunging as a result. I am saying probably because I would have needed to view overnight and swap markets in real time to say for sure (or at least talk to someone who does, like an active trader)...

3 comments:

Rower32 said...

if Turkish growth is strong why is the lira and bourse down?

Well, valuation matters re the equities..you expect below average returns when you buy something at an expensive multiple..

http://www.bloomberg.com/news/2010-11-24/turkey-stocks-priciest-since-2003-as-worst-profits-imperil-crowded-trade-.html

the markets are forward looking. although the growth rate is still above its peers turkey is not a growth stock anymore.

Emre Deliveli said...

Rower32 is right; as an economist, I can never think of in terms of valuation:), but I have been a lot of news of late similar to the one he sent...

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