Turkish equities experienced an inflow of $48mn in the week ending June 30 as the benchmark BIST-100 tested a new record high of 101,416 on July 5, Turkey's central bank said on July 6.

The total equities inflow so far this year tops $2.3bn, in parallel with portfolio inflows to the emerging markets universe during this year to date although analysts say a government-driven credit expansion has fed through into the performance of shares on the stock exchange.

Turkish government debt securities, meanwhile, saw an inflow of $188mn last week, data from the central bank also showed. There has been an overall inflow of $3.73bn into the debt securities in the year so far.

The Turkish lira had lost 0.42% d/d against the USD to trade at 3.6216 as of 16:30 local time on July 6 while the BIST-100 was down 0.07% to 100,673. The BIST-100 index was up 29% on an annual basis.

Turkey's financial markets have performed well in the first half of this year. International investors have shown strong interest in Turkish assets despite the range of political and economic woes amid Turkey's extended and indefinite state of emergency.

Markets have given a positive reaction overall to the narrow Yes vote for an executive presidency in the April 16 referendum. However, concerns over the future economic and political outlook are still strong.

Better-than-expected macro indicators have supported the performance of Turkey's financial markets despite concerns over the accuracy of the statistics institute’s controversial revisions in its methodologies. However, a solid set of geopolitical risks, which now also includes the Qatar crisis, pose threats to the outlook.

Political uncertainties in the US over President Donald Trump’s future curbed expectations for offensive rate hikes by the Fed. Consequently, portfolio inflows to emerging markets escalated during recent months.

Borsa Istanbul has enjoyed overall capital inflows across this year so far. Markets, however, are suspicious that an unknown big fund trading with algorithms - “The Dude” as local traders refer to it - is behind the unexplained rally that has taken place since the beginning of 2016.

Meanwhile, in a pyschological ploy Borsa Istanbul is considering cutting the last two digits from the BIST-100 index and is discussing the issue with local market participants, Himmet Karadag, head of the stock exchange, announced on June 20.

Borsa Istanbul last lopped two digits from its benchmark index at the beginning of 1997 when the index closed in on six figures. The rebasing triggered a 64% m/m jump in the BIST-100, with the index rising 254% y/y by the end of 1997.

The World Bank is forecasting a quickening of Turkey's annual inflation to 9% at the end of 2017 from last year’s 8.5% while the OECD raised its 2017 CPI inflation forecast for Turkey to 10.4% in its June Economic Outlook forecast from its previous forecast of 7.7% given last November.