Page 8 - bne_March2019_20190306 magazine

8 I Companies & Markets bne March 2019
Has Turkey equity market rally run its course?
Akin Nazli in Belgrade
Turkey’s stock market has returned 52% since last August as it recovers from a deep plunge caused by last year’s currency crisis. But now investors are starting to wonder if the recovery rally has run its course.
VTB Capital downgraded Turkish equities to equal weight from overweight in emerging markets although it is still relatively more upbeat on banks than non-financials in Turkey portfolios, Akin Tuzun of the Russian investment bank said
on February 19 in a research note entitled “Turkish Equities - Taking profits in overweight positions”.
The Turkish equity market has risen 52% in dollar terms since its lows in August, and outperformed the EM/EMEA space by 55%. VTB Capital was bullish in 3Q18, upgrading Turkey and Turkish banks to a strong buy; however, it now sees the risk- reward as more balanced.
On February 21, the central bank said in its regular weekly bulletin that total outflows from Turkish equities amounted
to $169mn in the first half of February versus an inflow of $1.34bn in January while outflows from domestic government debt securities stood at $308mn between February 1 and February 15, bringing total outflows so far this year to $638mn.
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Bank rally over
In a separate research note entitled “Turkish Banks – Time to take a breather” published also on February 19, Tuzun said that VTB Capital revised its view on Turkish banking sector to Neutral from Strong Buy.
Following the restructuring of the bank sector after the 2001 crisis the sector became a favourite of investors and remains strong to this day. Turkish banks rallied 78% in dollar terms from their lows in August, and outperformed global EM and EMEA financials by 70% and 68%, respectively.
After the rally of the last five months VTB cut Akbank, Garanti Bank, Halkbank and Isbank to Hold from Buy but it still keeps Vakifbank and Yapi Kredi Bank at Buy. The investment bank expects high volatility in 2019.
The share of foreign investors in the free float of Borsa Istanbul has risen back to its highs of the past five years. Thus, the mar- ket is no longer under-owned by foreign institutional investors, which caps further upside risks, VTB Capital believes.
Some industrials still attractive
VTB Capital also believes it is time to trade again in Turkish equities. Although VTBC is in its ‘neutral’ territory for various