Turkey Stocks Rise Most in World as Lira Beats Emerging Peers

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Skyscrapers and buildings stand illuminated at night on the city skyline seen from the Sapphire viewing platform in Istanbul.

Photographer: Kerim Okten/Bloomberg
  • Gauge for banking equities climbs the most in almost 2 weeks
  • All but three of the Borsa Istanbul 100’s members advance

Turkish stocks outperformed all other world equity markets on their best day since a failed coup battered investor confidence a week ago.

Bonds also advanced, while the cost of insuring the country’s debt against default fell, after Prime Minister Binali Yildirim said the government plans to set up a multibillion-dollar fund to support economic growth. The lira strengthened the most among 24 emerging-market currencies tracked by Bloomberg and the Borsa Istanbul 100 Index advanced 3.4 percent by the market close in Istanbul.

Here are some highlights of the rally across Turkish assets

  • Ninety-seven stocks on the Borsa 100 rose, the most since February
  • The gauge for banking equities climbed the most in almost two weeks
  • The lira gained as much as 1.4 percent, as its one-month implied volatility dropped
  • Five-year credit default swaps fell a third day

The lira depreciated to a record low against the dollar last week and the worst equity selloff since 2008 wiped about $36 billion from the stock market as investors fretted over the fallout from the coup attempt. While thousands have been arrested since the failed putsch on July 15, the purge of those allegedly implicated in the upheaval is almost over, Yildirim said in an interview on Sunday. The government plans to invest billions of dollars in infrastructure to keep growth on track, he said.

“Those who want to or have to withdraw from Turkish assets have done so,” Burak Cetinceker, a money manager at Istanbul-based Strateji Portfoy, said by phone. “The relative easing in tension, moderate rhetoric among political parties and Prime Minister Yildirim’s plans will start supporting investor sentiment.”

The lira gained 0.9 percent to 3.0403 per dollar as of 6:36 p.m. in Istanbul. The currency’s one-month implied volatility, a gauge of expected swings, fell for a third day to 14 percent after climbing to the highest level in more than a year last week.

Turkish Bargain

The Borsa Istanbul 100 Index rose 3.4 percent as 97 members advanced, more than any other day since February on a closing basis. The Borsa Istanbul Banks Sector Index added 3.2 percent, the most in almost two weeks. Turkiye Garanti Bankasi AS’s 3.1 percent increase was the biggest contributor to gains on both the the country’s banks and the main stock index.

The average valuation for members of the Borsa 100 over the next 12 months relative to the MSCI Emerging Markets Index dropped to a seven-year low last week. Turkish stocks were trading at 7.8 times future earnings on Monday, up from 7.5 times after the selloff.

The country’s 10-year local currency bonds rose for a second day as the yield retreated 17 basis points. Credit-default swaps dropped to 271 basis points after jumping to a five-month high last week.

“The worst seems to be over for now,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS in Istanbul, said by e-mail. The “hunt for yield globally is leading to some bottom-fishing activity,” he said.

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