Credit Suisse Says Buy More Turkish Stocks as Lira Gains on ECB

Updated on
  • Swiss bank recommends boosting holdings relative to EMs
  • Lira advances most among peers on ECB stimulus outlook

Turkish stocks gained the most in four weeks as Credit Suisse Group AG recommended investors buy them following a selloff that dragged down valuations. The lira advanced the most in emerging markets.

The Borsa Istanbul 100 Index rallied 2.1 percent to 76,785.45 in Istanbul after Alexander Redman and Arun Sai, analysts at the Swiss bank, recommended boosting holdings by 20 percent relative to their weighting in the MSCI Emerging Market Index. The profitability of lenders will recover next year and the lira’s devaluation will be "far more measured" than its 19 percent slide in 2015, the London-based analysts said.

The bullish call marks a shift in sentiment toward Turkish stocks following a price-slide that spanned all but one of the past seven months and pushed the average valuation for companies on the Borsa Istanbul to less than 8.64 times projected 12-month earnings last week. That was near a two-month low and a discount of about 22 percent to emerging markets. The nation’s assets were also bolstered on Tuesday by broader enthusiasm that the European Central Bank will increase monetary stimulus, offsetting sanctions imposed by Russia over the downing of one of its warplanes in Syria.

"Turkey is one destination that should benefit from additional monetary easing by the ECB,” Isik Okte, a strategist at Istanbul-based TEB Investment, said by e-mail.

Bigger Profits

The lira strengthened 0.9 percent to 2.8871 per dollar on Tuesday at 5:59 p.m. in Istanbul, advancing for a second day after its worst weekly loss since March. The currency trimmed gains after an explosion was heard near an Istanbul metro station, which newspaper Yeni Safak reported was caused by a bomb.

On the stocks gauge, banks led gains among 91 of the 100 members. An index tracking 11 of lenders climbed 3.1 percent, the most since Nov. 2. Lenders will post 25 percent growth in earnings per share next year, according to Credit Suisse’s forecasts.

The nation’s bond-market continued to show signs of stress, with the yield on two-year notes increasing three basis points to 10.58 percent. President Vladimir Putin didn’t meet President Recep Tayyip Erdogan at the climate summit in Paris on Monday. Russia, Turkey’s second-biggest trading partner last year, imposed sanctions including an import ban on fruits and vegetables and travel limitations.