While the BIST 100 index in Borsa Istanbul completed June with a 2.38 percent increase at 10,647.91 points, it left behind the leading indices in the world by recording a 42.54 percent increase in the first half of the year.
The rally that began on the New York Stock Exchange this year, led by the technology sector, also carried over to European and Asian equity markets.
In the first half of the year, the Nasdaq index on the New York Stock Exchange in the US rose by 18.13 percent, the S&P 500 index by 14.48 percent, and the Dow Jones by 3.79 percent, while in Europe the DAX 40 index in Germany rose by 8.86 percent, the FTSE 100 index in the UK by 5.57 percent, and the MIB 30 index in Italy by 9.23 percent. In France, the CAC 40 index fell by 0.85 percent.
During this period, in Asia, the Nikkei 225 index in Japan rose by 18.28 percent, the Hang Seng index in Hong Kong by 3.94 percent, the Sensex index in India by 9.40 percent and the Kospi index in South Korea by 5.37 percent, while the Shanghai Composite index in China decreased by 0.25 percent.
In the same period, BIST 100 index increased by 42.54 percent to 10,647.91 points, leaving major world indices behind and also renewed its monthly closing record. The index also reached its highest level at 11,088.01 points.
BIST 100 index has increased by 28.4 percent in dollar terms since the beginning of the year, reaching 325.45 points, and has achieved its highest monthly closing since February 2015.
BANKING WAS THE MOST PROFITABLE WITH 74 PERCENT
When the sector indexes are examined in detail, the banking index has increased by 73.56 percent and the holding index has increased by 46.34 percent since the beginning of the year. While all sector indexes have pleased their investors since the beginning of the year, banking has been the one that has gained the most.
When this process was examined on a stock basis, 78 of the stocks included in the BIST 100 index gained value, while 22 lost value.
Among the stocks that increased the most in the first quarter of the year, Tav Airports with 141.40 percent, Mavi Giyim with 122.94 percent and Ülker with 107.82 percent ranked first, while Qua Granite with 41.46 percent, Europower Energy with 36.85 percent and Hektaş with 36.42 percent were the companies that lost the most value.
“WE EXPECT THE POSITIVE TREND TO CONTINUE IN THE STOCK MARKET IN THE SECOND HALF OF THE YEAR”
MT Portfolio Portfolio Manager Umut Deniz Pak, in his statement to AA correspondent regarding the performance of BIST 100 index, emphasized that the index ranks first in the world in terms of both TL-based and dollar-based returns.
Pak, who stated that when MSCI indices are examined, the MSCI Turkey index has diverged positively by 29 percent from the MSCI Emerging Markets index and 23 percent from the MSCI World index since the beginning of the year, said, “The change in economic management after the general elections and the return to strict policies to combat inflation, the decrease in the country’s risk premium with the steps taken, the more stable exchange rates, the increase in the foreign exchange reserves of the Central Bank of the Republic of Turkey (TCMB) and the rating increases from credit rating agencies were the factors supporting the stock market.”
Pak stated that despite the positive trend in the market, it was difficult to say that the upward movement was widespread and made the following statements:
“In the first half of the year, only 34 percent of stocks traded on Borsa Istanbul outperformed the BIST 100 index, while 19 percent of stocks closed the first half of the year with negative returns. During this period, we occasionally saw the effects of tight monetary policy on company balance sheets. However, both the impact of inflation accounting practices on financial statements and the confusion it created were effective in pricing. When we look at it on a sectoral basis, we see that the banking sector led the upward trend in the market. Since the beginning of the year, the banking index has outperformed the BIST 100 index with a 74 percent increase. The downward movement we saw in Turkey’s 5-year credit risk premium (CDS) in particular was effective in investors’ turning to bank stocks. The insurance index, the trade index, which is mostly composed of food and retail companies, and the communications index also yielded above BIST 100.
Although foreign investors were occasionally active on the purchase side of Borsa Istanbul in the first half of the year, we have seen foreign outflows from the equity market in the last 1.5 months. According to TCMB data, since the beginning of the year, foreign investors have sold approximately 1 billion dollars worth of net stocks, while they have purchased 8.8 billion dollars on the Government Domestic Debt Securities (DİBS) side. Therefore, although foreign interest continues to increase on the fixed-income side, it is seen that the foreign profile that makes long-term and high-value investments in the stock market has not yet participated in the market as expected.
Pak stated that they think the most critical headline for the markets in the second half of the year will be inflation, and that due to the high inflation seen especially in the summer months last year, they expect the base effect to come into play from June this year and annual inflation to trend downward.
Pak noted that they expect foreign interest in Borsa Istanbul to increase in the medium term if the expected credit rating increases and the targeted decrease in annual inflation occur in the upcoming period following the process of exiting the grey list, which became official on Friday, and made the following assessments:
“The Central Bank is particularly focused on the deceleration of domestic consumption in terms of inflation. The fact that the consumer confidence index announced in June fell to its lowest level of the year indicates a slight cooling in domestic consumption. With the impact of all these factors, we expect the stock market to continue its positive course in the second half of the year. However, during this period, we consider the correction processes that may be sometimes distressing for investors due to the impact of the high interest rate environment as normal.
We need to state that we are selective, although we are positive about the equity market. We think that telecommunications, food and beverage, aviation, food retail and healthcare sectors will be at the forefront in general terms. Industrial companies, export companies and REITs that diverged negatively in the first half of the year may come to the forefront if interest rate cut expectations occur towards the end of the year. Although the potential in terms of valuation in banks has decreased after the performance in the first half, the liquidity of sector stocks in case of possible foreign inflows may bring banks to the forefront periodically.
“WE THINK THE INDEX MAY TEST THE DOLLAR-BASED 365-370 POINT RESISTANCE”
Colendi Securities Analyst Sadullah Çalışır also touched on the fact that the BIST 100 index performed well above inflation in the first half of the year, led by banking, and stated that foreign investors, especially after the 500 basis point interest rate hike in March, increased their weight on the bond side in line with their expectations, but they were on the net seller side in the stock market.
Stating that the first half of the year passed under the shadow of inflation accounting, Çalışır said that companies had difficulty making profits after inflation accounting and that the uncertainties created by the said practice were also reflected in position preferences.
Çalışır stated that the sector that does not apply inflation accounting and the companies that are not subject to TSM-29 because their functional currency is not TL, mostly created an alpha effect in this period, and said, “Although the uncertainty has decreased somewhat after the first quarter financial statements were left behind, it seems that it will continue to create pressure on the market until a permanent decrease in inflation is achieved.”
Çalışır stated that the determination shown by the TCMB with its return to orthodox policies and the steps it took in the fight against inflation increased the interest of domestic investors in TL assets, and made the following assessments:
“Along with the renewed confidence of the CBRT, the significant pullback in Turkey’s 5-year CDS has also had a positive impact on TL assets. The rating increases from rating agencies and signals that these increases will continue have been the main story in the reduction of the discount that Borsa Istanbul has had for a long time compared to similar countries. I expect foreign investors to increase their interest in stocks as well as risk-free assets as the steps taken begin to pay off in inflation in the upcoming period.”
Çalışır, recalling that the index reached its peak of the last 9 years with 345 points in dollar terms in the first 6 months of the year, said, “I think the dollar-based chart of the index is more meaningful during this period. I predict a fluctuating course between 300-330 dollars (-+5) in the BIST 100 index throughout the summer period. Possible pullbacks to the 300 dollar region can be seen as a buying opportunity for investors. The slowdown in inflation will be monitored during this period. We think that if there is a significant slowdown in inflation, the index may test the resistance of 365-370 points in dollar terms.”
Stating that the main scenario for the index in the upcoming period will be a monthly downward trend in inflation and a possible interest rate reduction cycle afterwards, Çalışır made the following assessments:
“While the ECB, one of the major central banks, is expected to start reducing interest rates and the Fed is expected to take the first step towards reducing interest rates during the year, Turkey has now come to a position where it will receive a significant share of the capital flow that may flow to developing countries. For this, if inflation decreases in line with the TCMB’s targets, and if we see monthly inflation figures below 2 percent, especially in the last quarter, there will be an increase in the valuations of companies with a decrease in long-term risk-free returns and sectors that will be positively affected by the interest rate reduction cycle. Sectors that performed poorly in the first half of the year can be expected to come to the forefront in this period. Following the said downward trend in inflation, I expect a decrease in bond yields and then an increase in the weight of foreign investors in stocks.
Telecommunications, food and beverage, defense industry and insurance sectors are among our favorite sectors. If inflation approaches targeted levels, the market may want to price in the interest rate reduction cycle in advance. If this scenario occurs, brokerage firms, REITs and some growth stocks with high multipliers may selectively diverge positively again due to the positive impact of low interest rates on valuations. In the insurance sector, which is one of the sectors most positively affected by the real interest rate environment, pricing that the best period may be behind us may start early.
