Turkish stocks rebounded as a slump that sent equity valuations to a three-month low lured back investors. The lira fluctuated.
The Borsa Istanbul 100 Index added 0.4 percent to 78,146.25 at the close, after yesterday falling 5.1 percent. The currency fell 0.1 percent to 2.7547 against the dollar at 5:41 p.m in Istanbul after rising as much as 0.7 percent. Bonds fell, with the yield on the two-year note rising to a one-month high.
Turkish assets tumbled yesterday after voters on Sunday denied the ruling AK Party a majority, sparking a lack of clarity on who will oversee the $800 billion economy. The declines made valuations attractive, according to Michel Danechi at Armajaro Asset Management and Kerem Baykal at Ak Portfoy.
“Volatility is likely to continue, but there is good value here in some specific names after the selloff,” Baykal, fund manager at Ak Portfoy in Istanbul, said by e-mail. The plunge yesterday “presented a very rare opportunity for value managers to own some great businesses,” he said.
Banks led gains, with gauge of 11 stocks rebounding from a 13-month low. Turkiye Garanti Bankasi AS and Akbank TAS, the nation’s largest lenders by market capitalization climbed a respective 2.1 and 1.6 percent.
Borsa Istanbul 100 trades at 9.4 times estimated 12-month earnings, compared with a multiple of 11.8 for the MSCI Emerging Markets Index. The market “selectively” offers value, Danechi, a fund manager at Armajaro in London, said by e-mail. Turkiye Is Bankasi AS was among stocks he favored.
While the slump has made shares attractive, the election outcome raises the possibility of a fragile minority administration, weeks of coalition bargaining or a repeat election to break the deadlock.
The lira has depreciated more than 15 percent this year, the most among 24 emerging-market currencies tracked by Bloomberg. The yield on two-year government notes climbed for a second day, adding 10 basis points to 10.29 percent, the highest since May 6 on a closing basis.
President Recep Tayyip Erdogan will meet Prime Minister and AK Party leader Ahmet Davutoglu at 5 p.m. in Ankara, according to an e-mailed statement from Erdogan’s office.
“Until a clearer political picture emerges, we could see the lira fluctuate within a relatively broad range around the 2.75 mark,” Pinar Uslu, a strategist and ING Bank AS in Istanbul, said by e-mail.
Lawmakers from opposition Nationalist Movement Party, or MHP, and pro-Kurdish Peoples’ Democratic Party, or HDP, ruled out a coalition with AKP. Sezgin Tanrikulu, deputy chairman for the secular Republican People’s Party, said they are open for talks.
“Reactionary buying is not likely to last long,” Volkan Muhurcuoglu, an analyst at Oyak Securities in Istanbul said by e-mail. “There should be signals of a sustainable government for long-term and consistent gains.”