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Turkish Banks Lead Stock Index to Record on S&P Upgrade Bets

May 8 (Bloomberg) -- Turkish banks lifted the benchmark stock index to a record as investors speculated Standard & Poor’s will raise the nation to investment grade and as Kurdish militants started withdrawing from the country today.

Turkey’s banking index advanced 2.6 percent to the highest level since at least May 2001, driving the Borsa Istanbul gauge of 100 largest stocks up 1.6 percent to 90,852.21 at the close in Istanbul. Financial stocks have a 57 percent weighting in the benchmark measure, according to data compiled by Bloomberg.

S&P will hold a meeting in Turkey on June 4, according to a statement on the rating company’s website today. Turkey is rated BB+ at S&P, one level below investment grade. PKK fighters, whose clashes with the Turkish state have killed about 40,000 people since 1984, began withdrawing under a peace agreement being negotiated between the government and jailed PKK leader Abdullah Ocalan, said Gultan Kisanak, a senior Kurdish lawmaker, in a telephone interview today.

“Several expectations that support the market have come together at the same time,” Tunc Obuter, the head of trading at Garanti Investment, a unit of Turkey’s largest bank by market value, said by e-mail today from Istanbul. “First is the expectation of the upgrade, and then we have the PKK withdrawal.”

The PKK is considered a terrorist organization by Turkey, the European Union and the U.S.

S&P said in an e-mailed statement today its announcement about the meeting was no indicator of possible future rating action. Any decision on ratings will be made on analytic criteria and in accordance with its policies, it said.

Profit Rises

Turkish banking industry profit rose 16.3 percent in the first quarter to 6.95 billion liras ($3.9 billion), according to a statement from the regulator in Ankara today.

Garanti led the move on the stock exchange, rising 3.9 percent to 10.75 liras, an all-time high, with trading volume at 96 percent of the stock’s daily average. Akbank TAS, which is part-owned by Citigroup Inc., added 1.6 percent to 10.16 liras. Turkiye Is Bankasi AS, or Isbank, climbed 3.3 percent to 7.58 liras, also the highest on record.

Turkey received its first investment grade rating in 18 years from Fitch Ratings on Nov. 5. Moody’s Investors Service ranks the nation one level below investment grade at Ba1.

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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