Despite all the challenges facing their economies, the stock exchanges of Egypt and Türkiye managed to emerge from the cycle of underperformance to record strong performances during August, which was the worst in years for emerging markets, in general.
Bloomberg reported that stocks traded on the Cairo and Istanbul bourses were the biggest gainers among peers in August, defying a 6 percent decline in emerging markets during the month.
The monetary policies and purchases of domestic investors hedging against the high inflation rate in both countries have helped protect their financial markets from the repercussions of China’s growing economic problems.
In addition, the US Federal Reserve signals its readiness to raise interest rates again.
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The rise in Egyptian and Turkish stock indices marked a sharp shift from the poor performances of the first seven months of this year, with Turkish and Egyptian stocks recording some of the biggest dollar-denominated losses among emerging markets.
Hassanein Malik, an economic analyst at Telemir in Dubai, said: “The faltering policy correction in markets such as Egypt and Türkiye, as well as Nigeria and Pakistan, has put these markets back on the radar of investors, but they are still reeling from years of currency depreciation and restrictions on capital movements. The outlook is so low that any sign of improvement is worthwhile.”
Sources have previously said investor confidence in emerging market debt has returned, despite the turmoil facing their economies. Indicators have shown that investors are demanding lower yields to buy emerging-market bonds, a sign of an improved outlook on the economies of that region.
The improvement was led by Egyptian dollar bonds, both government-issued and corporate-issued, according to data from the Bloomberg Composite Emerging Market Dollar Debt Index.
Türkiye
In Türkiye, President Recep Tayyip Erdogan signaled his intention to give his finance minister and central bank governor room to move away from ultra-loose monetary policies, including ultra-low interest rates, following his re-election to a new term in May.
Türkiye’s central bank raised interest rates by 750 basis points this month, exceeding expectations and pushing up stock, currency, and bond prices.
Domestic product
On Thursday, Türkiye’s economy grew 3.8 percent year-on-year in the second quarter of this year, which was higher than expected.
According to a statement by the Turkish Statistical Council on GDP data for the country’s economy during the period between April and June, the Turkish economy continued to grow for the twelfth consecutive quarter.
GDP estimates in the second quarter rose 60.7 percent from the same quarter last year to 5.5 trillion Turkish liras ($271.5 billion), the statement said.
Growth figures in the second quarter came in higher than expected, with economic activity expected to continue slowing for the rest of the year.
President Tayyip Erdogan’s economic team is seeking to create a more sustainable ground for growth by returning to traditional rules by raising interest rates to balance markets and combat inflation and current account deficits.
GDP expanded by 3.8 percent year-on-year compared to the downwardly revised 3.9 percent in the first three months of the year. Growth was forecast at 3.1 percent.
Assessing the figures, Treasury and Finance Minister Mehmet Şimşek said his country’s economy continued its strong growth in the second quarter of the year despite ongoing efforts to avoid the economic effects of the devastating earthquake on February 6.
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