Turkey Stocks Gain Most in World on Fed Euphoria as Banks Surge

Turkey’s stock index jumped the most in the world after the Federal Reserve refrained from stimulus cuts. Government bonds rose and the lira strengthened.

The Borsa Istanbul National 100 (XU100) index surged 7.4 percent, the most since November 2008 and the steepest increase among more than 90 global benchmarks tracked by Bloomberg, to 80,198.95 at 12 p.m. in Istanbul. The gauge has risen 23 percent since closing at an one-year low on Aug. 28, heading for a so-called bull market. Two-year benchmark note yields fell 71 basis points to 7.94 percent, the lowest since July 5. The lira gained more than 2 percent overnight and was at 1.9523 per dollar.

Fed policy makers said yesterday they want more evidence of lasting improvement in the economy before paring the central bank’s $85 billion monthly bond-buying program. The median estimate in a Bloomberg survey of economists was for a $5 billion reduction. The MSCI Emerging Markets Index rose 2.3 percent to 1,024, poised for the highest close since May 28.

“The Turkish market has rigorously priced in the Fed euphoria,” Figen Ozavci, the deputy chief executive officer at Meksa Yatirim in Istanbul, said in a phone interview. “The stock market had lost its popularity among investors since May. Now it may regain some of that.”

Turkiye Garanti Bankasi AS (GARAN), the nation’s largest bank by market value, climbed 10 percent, poised for the biggest increase since October 2008. Akbank TAS (AKBNK), the lender part-owned by Citigroup, Inc., rose 11 percent, while state-run Turkiye Halk Bankasi AS (HALKB) gained 9.9 percent. The 16-member banks index jumped 10 percent, the most since November 2008.

The “surprisingly dovish” Fed decision amounts to a “bailout for the fundamentally challenged Turkey,” Bank of America Merrill Lynch analysts, including David Hauner, said in a report on emerging market bonds and currencies today.

Fed chief Ben S. Bernanke first signaled on May 22 that U.S. policy makers could reduce monthly bond purchases of $85 billion, triggering a selloff in emerging markets. More than $50 billion has left global funds investing in emerging-market bonds and stocks since May, data from EPFR Global show.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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