Moody’s Upgrade Lifts Turkish Banks to New High: Istanbul Mover

Banks pushed Turkish stocks higher a day after Moody’s Investors Service raised the country to investment grade and the central bank cut interest rates to a record low.

The 16-member banking index climbed 0.8 percent to 198,791.52 points at 4:14 p.m. in Istanbul today, heading for the highest level since at least May 2001 and pushing the Borsa Istanbul National 100 index up 0.5 percent. Turkiye Garanti Bankasi AS rose 1.4 percent, while Akbank TAS added 0.5 percent and Turkiye Sinai Kalkinma Bankasi AS rose 1.9 percent.

Moody’s yesterday raised Turkey’s government bond ratings by one step to investment-grade Baa3. Earlier, the central bank in Ankara lowered its benchmark repo rate by 0.5 percentage point to 4.5 percent while also trimming the top and bottom ends of its so-called interest-rate corridor by the same amount to 6.5 percent and 3.5 percent, respectively.

“The Moody’s upgrade will help capital inflows shift to long-term from short-term, while helping to make the low interest rate environment sustainable,” Muge Dagistan, an analyst at FinansInvest in Istanbul, said in a phone interview today. “Both are positive for banks.” With Turkey going through “a complete re-rating,” the economy’s recovery will be stronger this year, Dagistan said.

The Turkish economy expanded 2.2 percent in 2012, down from 8.8 percent in 2011. Fitch Ratings raised Turkey to investment grade in November, while Standard & Poor’s ranks the country BB+, one level into junk. S&P may upgrade Turkey in the next six to nine months, Zsolt Papp, who manages around $2.5 billion of emerging-market debt at Union Bancaire Privee in Zurich, said in a note e-mailed today.

Turkey’s banking index advanced 22 percent this year. Akbank and Garanti, which account for a combined 52 percent of the gauge, trade at forward price-to-earnings multiples of 12 and 12.7, respectively, data compiled by Bloomberg show. That compares with 6 for Sberbank of Russia, 9.8 for Brazil’s Itau Unibanco Holding SA and 15.4 for Poland’s Bank Pekao SA.

“The central bank will continue cutting, because it’s fighting against capital inflows that risk lira appreciating too much,” Dagistan said. “These cuts will support the decline in bond yields, which in turn will allow banks to profit on their bond portfolios.”

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