Turkish Stocks Set for Longest Weekly Winning Streak Since 2009

(Bloomberg) -- Turkish stocks are set for their longest streak of weekly gains in more than 11 years, as an improved global appetite for riskier assets and a pleasing switch to more orthodox monetary policy attracts investors to a market trading at alluring valuations.

The Borsa Istanbul 100 Index has advanced 3.8% in the first week of January, climbing to a record, and is headed for its 10th week of gains. That makes the rally that started in early November after an overhaul of Turkey’s top economic management the longest since May 2009.

Foreign investors have purchased $1.6 billion of Istanbul equities and the lira has strengthened 13% against the dollar since Turkey replaced its treasury and finance minister and installed a new central bank head, who has worked toward restoring credibility with market-friendly messages and back-to-back rate increases. At the same time, optimism over progress in providing coronavirus vaccines and bets on stimulus in major economies has spurred a rush into emerging markets.

Even after the long rally, banks and major holding companies, which are the heavyweights in the benchmark stock index, remain attractively valued, according to Haydar Acun, managing partner at Marmara Capital in Istanbul.

The outlook for Turkish equities hinges largely on the attitude of foreign investors, as enthusiasm among locals for stocks is almost certain to wane, Acun said.

“There has been euphoria among local investors after easy gains in nearly all small caps, but this will end at some point,” he said. “It will either happen through a tightening in margin trading rules, the abandoning of short-selling bans, and the widening of daily price margins back to 20% from 10% -- or most likely after another rate hike, which would curb local investors’ appetite for equities.”