IMKB continues to decouple from global markets
Posted by meb at September 15th, 2009
The worst bear run since the Great Depression is now in the midst of one of the most stunning reversals of all time.
After shedding historic amounts, the İstanbul Stock Exchange (İMKB) as well as markets around the world have performed near miracles, with US equities rallying more than 50 percent and the İMKB gaining more than 65 percent.
But is the rally sustainable? While analysts in the West appear to be divided, in Turkey there appears to be a general consensus that we remain in a cyclical bull market. Given the relatively lackluster economic signs in the developed world, investors are increasingly beginning to question this.
Autumn is traditionally a time where markets cool. Nonetheless, in Turkey and elsewhere, investors continue moving their investments into riskier stocks and out of such safe haven investments as Turkish government bonds.
“Turkey is under-leveraged,” said Murat Berk, a senior analyst at YapıKredi. “But we can’t say this in the Anglo-Saxon world. The Western world is coming to the end of the credit leverage sector. Turkey is at the beginning,” he said, suggesting that Turkey would likely continue to be affected by dynamics quite different from those in the West.
Indeed, macroeconomic indicators have come in reaffirming the belief that things are improving, leaving room for sustained upward gains in the market. With inflation now standing at an all time annual low of 5.3 percent, last month’s consumer price figures, ringing in at 0.3 month-on-month in August and interest rates now standing at all time lows, the consensus is that when the Central Bank of Turkey meets this week, it will announce further rate cuts. Most economists say the economy bottomed out in the first quarter and has been on a slow march upwards since. Further adding to the view that Turkey’s markets would continue to perform differently from the rest of the world was the belief that the Turkish financial system is amongst the strongest in the world. “After the economy stabilizes, there will be room for credit and loan expansion,” Berk said, adding that this would “trickle down to the consumer.”
Nonetheless the market was in line for a modest correction. “Most of the expectations have been realized,” says Serhat Gürleyen, the director of İş Invest, adding that “we need some sort of a correction. Investors need a new story. Most of the equity funds rose 50-60 percent since the beginning of the year,” noting that most of the positive developments in domestic and international markets have been realized. Despite the limited amount of profit taking in the İMKB thus far, he was of the opinion that there would be an about 10 to 15 percent drop in the markets as investors cashed in on the gains that they had made over the last several months. He did not agree with analysts elsewhere in the world who believe the markets are now witnessing a decrease in risk taking. “Turkish markets sometimes decouple,” he said, pointing out that Turkish equities had largely decoupled from international markets. Indeed, according to recent figures, the total value of stocks traded on the İMKB had risen by 65.09 as of the end of July — up from TL 182.25 billion in total value at the close of last year — to the present total of TL 301 billion totaled on, making the İMKB the sixth-best performing market in the world. The market has continued to rise since then. “It’s a late bear market,” Gürleyen said, but added that “most of the bears are out of the market.”
But a number of domestic events last week have begun weighing in on the İMKB’s performance and leading some to question the future trends of the market. Last week’s announcement of the record high TL 3.8 billion tax fine placed against Doğan Holding also weighted the markets down and pundits are predicting that if a mediated settlement is not reached soon, the case has the potential to threaten to damage the fragile investor climate. If statements such as the one last week by an EU spokesman who suggested the case against Doğan would have an effect on EU negations is correct, then analysts expect further negative effects on the market. Indeed, Ersagün Şimşek, the director of Tera Brokers, said yesterday, referring to last week’s market performance, in a written statement that “Turkish equities came under pressure due to growing uncertainties over the International Monetary Fund [IMF] deal and a record level tax fine imposed on Doğan Yayın Holding,” noting that “this development has caused investor’s confidence to be undermined and will likely lead to a negative reaction from the EU in the next progress report.”
source: Today’s Zaman
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