The attention of many stockbrokers is now focused on the Turkish stock market. And not only because of the second round of presidential elections scheduled for May 28. The main reason lies in another - this market has shown tremendous profitability on the horizon of the last 3 years. In the period 2020-2022, the main Turkish index Borsa Istanbul 100 (BIST 100) increased by 480%. Just think about these numbers! The index was accelerated in November 2021, after which the market grew until December 2022. And only since the beginning of this year, the BIST 100 index has gone into correction, which at the moment has not even amounted to 38.2% to the wave of growth that started in November 2021.
What happened to the Turkish market and what was the starting point for its increase?
Many experts are inclined to believe that the roots of this insane growth originate from the currency crisis of 2021. The Central Bank of Turkey began easing monetary policy and undertook to reduce the key rate from 19% in August 2021, despite the fact that then inflation in the country already exceeded 21%. By the end of 2021, the rate dropped to 14%, and inflation accelerated to 36%. Since the beginning of 2022, the rate has remained unchanged at 14%. And after the start of the special operation, inflation in the country rose to 70%.
The country became a buffer zone between Russia and the West, and with the beginning of mobilization in Russia (autumn 2022), many Russians moved to live in this country, which provoked a big jump in real estate prices and its rent.
In 2022, rental prices in Turkey increased by 160.6%, which is why the country ranked first among 56 countries in this indicator.
I'm not surprised that for local residents, the events of recent years have become a trigger, pushing them to search for the safety of funds from inflation and they began to invest in local stocks as protection against high inflation.
Along with this, it is worth noting that foreign investors avoid the Turkish market because of the country's monetary policy. In 2022, they sold $2.2 billion worth of shares, as a result, the share of foreign investors in Turkish shares reached a record low of 35%.
The current correction of the Turkish market is now also related to the uncertainty around the elections. According to Fitch, political and economic uncertainty will remain at least until the end of the second round of elections. On the one hand, if the current president Recep Tayyip Erdogan continues to lead the country, it is unlikely that economic policy will be subject to changes. Under his management, Turkey has become virtually inaccessible for investment from the point of view of Western fund managers. But, on the other hand, the preservation of the former government can give some confidence in the future to its citizens.
By the way, the former alliance with Erdogan is economically beneficial for Russia and it will support him.
In the foreign policy arena, the issue of another extension of the "grain deal" may be raised, and on the domestic agenda, Turkey will receive its preferences as the largest gas hub within the framework of parallel imports.
In the first round of the presidential election, Recep Tayyip Erdogan scored 49.40%. In my opinion, Erdogan is highly likely to remain in power and get a majority in the second round.
It is quite possible that the results of the presidential elections will become a catalyst for a new growth of the Turkish stock market. From a technical point of view, a triangle trend continuation pattern is formed on the weekly chart of the BIST 100 index.
If the index drops to 4200-4220 points, then growth will begin from the Fibonacci level of 38.2%, and a "flag" model is also possible. But if the index drops to 3730-3750 points, then growth will begin from 50% of the Fibonacci level near the important support level of the growing trend from the end of 2021. In both cases, I will expect the subsequent growth of the market at least to the height of the model - up to 6500-6550 points.
In the first round of the presidential election, Recep Tayyip Erdogan scored 49.40%. In my opinion, Erdogan is highly likely to remain in power and get a majority in the second round.
It is quite possible that the results of the presidential elections will become a catalyst for a new growth of the Turkish stock market. From a technical point of view, a triangle trend continuation pattern is formed on the weekly chart of the BIST 100 index.
If the index to 4200 points, the lower limit of the model will be almost horizontal, but if the index drops to 3860-3900 points, then conversion to the "flag" model is possible. In both cases, I will expect the subsequent growth of the market at least to the height of the model - up to 6500-6550 points. An important support level for the index remains the growing trend from the end of 2021 - the level of 3760-3800 points.
The same view is shared by managers from Strateji Portfolio and Marmara Capital. They believe that the rally in the Turkish market can continue further, as local securities are still trading with an attractive price-to-earnings ratio. At the same time, Turkey's sovereign credit rating remains at the "B" level.
What happened to the Turkish market and what was the starting point for its increase?
Many experts are inclined to believe that the roots of this insane growth originate from the currency crisis of 2021. The Central Bank of Turkey began easing monetary policy and undertook to reduce the key rate from 19% in August 2021, despite the fact that then inflation in the country already exceeded 21%. By the end of 2021, the rate dropped to 14%, and inflation accelerated to 36%. Since the beginning of 2022, the rate has remained unchanged at 14%. And after the start of the special operation, inflation in the country rose to 70%.
The country became a buffer zone between Russia and the West, and with the beginning of mobilization in Russia (autumn 2022), many Russians moved to live in this country, which provoked a big jump in real estate prices and its rent.
In 2022, rental prices in Turkey increased by 160.6%, which is why the country ranked first among 56 countries in this indicator.
I'm not surprised that for local residents, the events of recent years have become a trigger, pushing them to search for the safety of funds from inflation and they began to invest in local stocks as protection against high inflation.
Along with this, it is worth noting that foreign investors avoid the Turkish market because of the country's monetary policy. In 2022, they sold $2.2 billion worth of shares, as a result, the share of foreign investors in Turkish shares reached a record low of 35%.
The current correction of the Turkish market is now also related to the uncertainty around the elections. According to Fitch, political and economic uncertainty will remain at least until the end of the second round of elections. On the one hand, if the current president Recep Tayyip Erdogan continues to lead the country, it is unlikely that economic policy will be subject to changes. Under his management, Turkey has become virtually inaccessible for investment from the point of view of Western fund managers. But, on the other hand, the preservation of the former government can give some confidence in the future to its citizens.
By the way, the former alliance with Erdogan is economically beneficial for Russia and it will support him.
In the foreign policy arena, the issue of another extension of the "grain deal" may be raised, and on the domestic agenda, Turkey will receive its preferences as the largest gas hub within the framework of parallel imports.
In the first round of the presidential election, Recep Tayyip Erdogan scored 49.40%. In my opinion, Erdogan is highly likely to remain in power and get a majority in the second round.
It is quite possible that the results of the presidential elections will become a catalyst for a new growth of the Turkish stock market. From a technical point of view, a triangle trend continuation pattern is formed on the weekly chart of the BIST 100 index.
If the index drops to 4200-4220 points, then growth will begin from the Fibonacci level of 38.2%, and a "flag" model is also possible. But if the index drops to 3730-3750 points, then growth will begin from 50% of the Fibonacci level near the important support level of the growing trend from the end of 2021. In both cases, I will expect the subsequent growth of the market at least to the height of the model - up to 6500-6550 points.
In the first round of the presidential election, Recep Tayyip Erdogan scored 49.40%. In my opinion, Erdogan is highly likely to remain in power and get a majority in the second round.
It is quite possible that the results of the presidential elections will become a catalyst for a new growth of the Turkish stock market. From a technical point of view, a triangle trend continuation pattern is formed on the weekly chart of the BIST 100 index.
If the index to 4200 points, the lower limit of the model will be almost horizontal, but if the index drops to 3860-3900 points, then conversion to the "flag" model is possible. In both cases, I will expect the subsequent growth of the market at least to the height of the model - up to 6500-6550 points. An important support level for the index remains the growing trend from the end of 2021 - the level of 3760-3800 points.
The same view is shared by managers from Strateji Portfolio and Marmara Capital. They believe that the rally in the Turkish market can continue further, as local securities are still trading with an attractive price-to-earnings ratio. At the same time, Turkey's sovereign credit rating remains at the "B" level.
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29/05 Recep Tayyip Erdogan won the second round of the Turkish presidential election with more than 52% of the vote.