Turkey Shares Climb to Record on Bets Peace Drive to Aid Rating

Turkey stocks headed for a record as growing optimism over a peace process with Kurdish militants in the nation’s southeast and falling commodity prices fueled bets of a second credit-rating upgrade this year.

The Borsa Istanbul National 100 index rose 3.1 percent to 88,669.73 at the close in Istanbul, advancing for an eighth day to the highest level on a closing basis since at least January 1988. The 16-member banking index jumped 4.5 percent to the highest since at least May 2001. Brent crude has slumped 14 percent from its high this year to $100.77 a barrel today.

Turkey is in talks with Abdullah Ocalan, the jailed leader of the Kurdistan Workers’ Party or PKK, in an effort to end a conflict that began in the early 1980s and has left about 40,000 people dead. Moody’s Investors Service described the process as a “visible and credit-positive step” in an April 11 report. Turkey’s import of oil and gas -- which amounted to $60 billion in 2012 -- was the main cause of the nation’s $47.5 billion current-account deficit last year, the world’s third-largest.

Apart from the peace process, the potential for deals with Iraq and Israel in the energy space and falling commodity prices are supporting the rally, Ali Riza Incekara, head of research at BGC Partners in Istanbul, said in an e-mailed report today.

Annual inflation in April is expected to drop to 6.5 percent from 7.3 percent in March, according to the median estimate of 10 economists in a Bloomberg survey. The statistics office in Ankara will publish the data tomorrow.

Fitch Ratings lifted Turkey to investment-grade status in November, the economy’s first such ranking in 18 years. Moody’s and Standard & Poor’s rate Turkey one level below investment grade.

‘Supportive Factors’

The “re-rating supportive factors” are in addition to investor expectations of another rating upgrade amid a declining interest rate environment that’s good for companies, according to the BGC report.

Lender Turkiye Garanti Bankasi AS rose 5.6 percent. Haci Omer Sabanci Holding AS, Turkey’s second-biggest group of companies, added 4 percent. Turkiye Halk Bankasi AS, a state-run lender, jumped 4.9 percent.

Two-year benchmark yields declined for a seventh day, tumbling 18 basis points to 5.02 percent, the lowest level since at least April 2005.

“As investors price in inflation expectations in bonds, the rally goes on,” Isik Okte, a strategist at Halk Invest in Istanbul, said in e-mailed comments. “Institutional funds especially favor Turkish banks and major holding stocks.”

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