Turkey Stocks Rally as Lowest Valuations in 4 Years Lure Traders

  • Borsa Istanbul 100 Index advances most in more than six weeks
  • Gauge's 12-month P/E ratio rises from lowest level since 2012

Turkish stocks jumped the most in more than six weeks, snapping a three-day losing streak, after the lowest valuations in almost four years lured traders back.

The Borsa Istanbul 100 Index increased 4.1 percent, led by banks, after a 7.1 percent decline over the previous three trading days sent the gauge to the lowest level since March 2014. The benchmark index on Monday traded at its weakest valuation in almost four years compared to expected earnings over a 12-month period.

While the nation’s current-account deficit shrank this year and the economy grew faster than expected in the third quarter, Turkey’s assets have spent most of 2015 under pressure. Stocks have declined 16 percent this year as the prospect of higher U.S. interest rates led to capital outflows from emerging markets, and heightened tensions in the Middle East raised the nation’s risk profile.

“Banks were trading close to or in some instances below the multiples they traded during the global crisis in 2009,” Aykut Ahlatcioglu, an analyst at Oyak Menkul Degerler in Istanbul, said by e-mail. “It’s normal that we see decent reactionary buying off of these cheap multiples once the heavy global selloff slowed down.”

Emerging-market stocks rebounded from a six-year low today and currencies gained as oil ended a seven-day slump.

Top Performers

Turkish stocks were the best performers out of more 90 gauges tracked by Bloomberg globally. The Borsa 100’s 14-day relative strength index had dropped to 26 on Monday, the lowest since August. A reading under 30 signals to some technical analysts that a security is oversold and may be poised to rebound.

Turkiye Garanti Bankasi AS led the increase, rising the most in six weeks to 7.24 liras per share. Turkiye Petrol Rafinerileri AS’s 7.1 percent advance was the second-biggest contributor to gains.

Meanwhile the lira climbed 0.7 percent to 2.9593 per the dollar at 5:48 p.m. local time, trimming its decline this year to 21 percent. The nation’s two-year government bonds rose as the yield dropped seven basis points to 11 percent, its first decline in eight days.

Turkey’s treasury sold five-year and nine-year fixed-coupon government debt at 11.05 percent and 10.79 percent compound yield, respectively.

Dovish Hike

Turkish assets also rallied as traders speculated that even if the U.S. Federal Reserve raises interest rates for the first time since 2006 tomorrow, it will signal the pace of further increases will be gradual. While the nation’s current-account deficit is narrowing, Turkey is still reliant on foreign inflows and therefore vulnerable to higher U.S. borrowing costs.

“The index is rallying on bargain-hunting buys and covering of short positions in banks and holding companies,” Isik Okte, a strategist at Istanbul-based brokerage Teb Yatirim, said by e-mail. “A dovish Fed rate hike is being priced in and if the language is not dovish, there will be disappointment for people who bought Turkish equities today.”

Before it's here, it's on the Bloomberg Terminal.