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February 22, 2019 www.intellinews.com I Page 2
Has Turkey equity market recovery rally run its course?
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 regu- lar weekly bulletin that total outflows from Turk- ish 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.
Bank rally over
In a separate research note entitled “Turk-
ish Banks – Time to take a breather” published also on February 19, Tuzun said that VTB Capital revised its view on the 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. Turk- ish 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 market is no longer un- der-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 it is in its ‘neutral’ territory for various metrics, it believes that there will be attractive trading opportunities for Turkish assets in 2019.
According to a separate research note on the Turkish energy industry published on February 20, VTB increased its 12-month target price for Tupras (Buy) to TRY 164 and lowered its target for Aygaz (Hold) to TRY12.3.
On February 21, Vladimir Bespalov of VTB Capi- tal said in a research note on Turkish cementmak- er Cimsa’s Q4 financials entitled “Weak financials support our cautious view” that VTB reiterates
its Hold advice for Cimsa with a 12-month target price of TRY8.
Cimsa reported a net loss of TRY62mn for Q4 vs. the TRY11mn net profit suggested by the con- sensus. Although white cement exports provide a certain cushion, VTB believes that Cimsa faces strong headwinds domestically.
On February 21, Turkish statistical institute TUIK said that Turkey’s construction cost index fell, for the third consecutive month, to 25.65% in Decem- ber from its peak of 39.66% in August. On Febru- ary 19, TUIK said that number of buildings, floor area of buildings, value of buildings and number of dwelling units given construction permits in 2018 decreased by 36.7% y/y, 48.9% y/y, 35.8% y/y and 53.3% y/y, respectively. On February 18, TUIK