Turkish Stocks Inch Back From Lows Amid Russian Reconciliation

  • Kremlin says Erdogan apologized for downing of a Russian jet
  • Israel-Turkey accord opens way for new gas contracts

Turkish stocks staged a partial recovery from earlier losses as Russia said President Recep Tayyip Erdogan apologized for the downing of one of its warplanes, while diplomatic reconciliation with Israel opened the way for a series of energy deals.

The Borsa Istanbul 100 Index ended the day 0.3 percent lower, with gains by Turkish Airlines, construction company Enka Insaat ve Sanayi AS leading the way in trimming a 0.6 percent decline earlier in the day.

The Kremlin’s announcement of Erdogan’s apology came on same day officials from Turkey and Israel announced they were mending diplomatic ties, potentially paving the way for multi-billion dollar gas contracts. The moves help alleviate concerns that Turkey was becoming increasingly isolated from the international community.

“On a perception level, there was this prevailing pessimism that Turkey will remain alone in the global arena and that its foreign affairs would not get better,” Burak Kanli, an economist at Finans Invest in Istanbul, said by phone. “This deal between Israel and Turkey may help cap investor pessimism and triggers bets that Turkey may tout a foreign policy that reflects economic realities.”

Enka Insaat led the advance in Turkey’s benchmark gauge, rising 6.5 percent on speculation its business in Russia would improve. Shares of Turkish Airlines, the nation’s flag carrier, rose 3.9 percent, regaining some ground from a 20 percent drop this year as Russian sanctions and a series of terrorist attacks weighed on the country’s tourism industry.

“Improving relations with Russia will further support the positive sentiment as Enka is one of the biggest real estate investors in Russia and was being negatively affected from the worsening sentiment regarding Turkish companies,” Toygun Onaran, an analyst at Teb Investment in Istanbul, said by phone.

Israel Deal

Israel and Turkey suspended relations six years ago after 10 pro-Palestinian Turkish activists were killed in a clash at sea with Israeli commandos. With Israel seeking to export fuel from its largest field and Turkey trying to cut its reliance on Russian gas, the energy deals that may follow the two countries’ reconciliation are a potential boon for both nations.

Istanbul-based Zorlu Enerji Elektrik Uretim AS, an electrical-utility company with investments in Israel, rose 4.1 percent, having earlier soared as much as 15 percent, with traders exchanging 130 million shares, around 12 times the 20-day average.

“Energy cooperation is the first thing that comes to mind when I think about the Israel-Turkey deal,” said Burak Demirbilek, an analyst at Istanbul-based Seker Yatirim Menkul Degerler. “While there are other company names out there, Zorlu is the first one investors think of and is perceived to be the biggest beneficiary” because it’s the only company with ongoing energy investments in Israel, he said.

Israeli Prime Minister Benjamin Netanyahu confirmed the agreement in Rome saying the deal will allow the country to export gas to Europe, while Turkey’s Prime Minister Binali Yildirim said the nation will complete a number of construction projects in Gaza and Jenin, including a 200-bed hospital and an industrial zone.

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