Sept. 19 (Bloomberg) -- Turkey’s stock index soared the most in more than three years after the Federal Reserve refrained from cutting monetary stimulus. Government bonds rose.
The Borsa Istanbul National 100 index surged 6.4 percent, the most since May 2010 and the steepest gain among more than 90 global benchmarks tracked by Bloomberg, to 79,466.04 at the close. All but seven stocks rose. The gauge jumped 21 percent since closing at a one-year low on Aug. 28, entering a so-called bull market. Two-year benchmark note yields fell 83 basis points to 7.82 percent. The lira gained more than 2 percent overnight and was at 1.9605 per dollar as of 5:47 p.m. in Istanbul.
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 2.4 percent to 1,025, 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, the nation’s largest bank by market value, climbed 13 percent, the biggest increase since October 2008. Akbank TAS, the lender part-owned by Citigroup Inc., soared 9.7 percent, while state-run Turkiye Halk Bankasi AS gained 9.9 percent. The 16-member banks index jumped 9.9 percent in its biggest increase 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, wrote in a bonds and currencies note. They said they are moving “from bearish to a more neutral stance” on the lira, while shifting to “a more bullish stance” on local debt and raising Turkey to market weight from underweight on external debt.
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.
“The market had unnecessarily exaggerated the risk for banks, over-punishing them,” Muge Dagistan, an analyst at Finans Invest in Istanbul, said in a phone interview. Central bank Governor Erdem Basci’s Aug. 27 pledge not to raise interest rates has also supported banks, she said. Dagistan’s top picks are Akbank, Halkbank and Turkiye Is Bankasi AS.
Volatility triggered by speculation over Fed policy has been a setback for Turkey’s push to list more foreign companies in Istanbul, Borsa Istanbul Chief Executive Officer Ibrahim Turhan said in an interview with Bloomberg yesterday. “The uncertainty over where and when the new equilibrium will be found is forcing investors to remain in liquid assets such as U.S. and German” government bonds, Turhan said.
The benchmark stock index’s 30-day volatility, a measure of price fluctuations, climbed to 38, the most in almost two months and the second-highest among 72 indexes tracked by Bloomberg after Dubai’s benchmark.
“The party will restart as the Fed plays on,” Baris Buyukdemir, general manager at Ceros Securities in Istanbul, said in e-mailed comments. “Investor interest toward the Turkish market is poised to be strong as capital inflows continue.”
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