Investors should buy bullish over-the-counter options on Turkish stocks because they may climb 23 percent as the nation’s economic recovery continues, Credit Suisse Group AG said.
Equity derivatives strategist Daniel Roy recommended buying a December call option on the Istanbul Stock Exchange National 30 Index with a strike price 10 percent above the current level while selling a June call at the equivalent strike price to help finance the cost of the trade. Calls give the right to buy a security for a certain amount, the strike price, by a set date. Investors also can help pay for buying the call by selling bullish options on the Euro Stoxx 50 Index, Roy wrote.
“There is significant room for higher equity prices in Turkey,” Roy said in a report yesterday. “The outperformance of the ISE 30 is more likely in a rising market.” Roy cited Credit Suisse analyst Alexander Redman, who upgraded Turkey to “overweight” on March 3 and said that Turkish stocks “rarely” underperform during an emerging markets equity rally.
The Turkish benchmark has fallen 10 percent this year as oil prices climbed, compared with a 5 percent increase for the Euro Stoxx 50. Oil rose to a 29-month high in New York yesterday as escalating violence in Libya bolstered concern that supply disruptions may spread through the Middle East.
“The time is now right to re-accumulate Turkish equity assets,” Redman wrote in the report. The nation’s “economic recovery remains robust with lead indicators signaling strong growth.”