Turkey Stocks Remain Expensive Amid Debt Crisis, JPMorgan Says

Turkish stocks are expensive and will only rally when the European sovereign-debt crisis diminishes, JPMorganCazenove said.

Turkish stocks trade at around 8.5 times their estimated 12-month forward price-to-earnings ratio and investors could find “a lot of places that are cheaper than Turkey in absolute terms as well as cheaper relative to their own histories,” wrote JPMorgan analyst David Aserkoff in a report, giving Russia and Poland as cheaper examples.

Investors in Turkey should move into banks, which may “surprise on the upside” with earnings upgrades, JPMorgan said. Top picks are Turkiye Garanti Bankasi AS (GARAN), Turkey’s largest bank by market value, UniCredit SpA Turkish unit Yapi & Kredi Bankasi AS and state-run Turkiye Vakiflar Bankasi AS.

For investors looking to benefit from a rebound in emerging markets, the nature of the bounce is key, JPMorgan said. A bounce-back driven by better global growth prospects would favor Russia, while a recovery stimulated by a pickup in Europe’s financial crisis is more likely to favor Turkey, it said.

Turkey is one of the most-exposed emerging markets to European exports and “risks to growth are high,” Aserkoff said.

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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