Turkish Stocks Erase 2020 Losses After Wave of Local Buying

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Turkish Stocks Erase 2020 Losses After Wave of Local Buying

(Bloomberg) --

Turkey’s benchmark equities gauge has erased its 2020 drop in a rally driven mostly by a wave of buying from local investors drawn to the market as they search for returns.

The Borsa Istanbul 100 Index gained as much as 1.5% on Monday and has climbed 37% from its March 23 low to be little changed for the year. Gains in discount grocery chain BIM BIM Birlesik Magazalar AS (IS: BIMAS ) and GSM operator Iletisim Hizmetleri AS (NYSE: TKC ) have been the biggest contributors to the advance, rising 38% and 28%, respectively, in that period.

Turkish stocks have outpaced developing-nation peers, with the MSCI emerging-market index still down 10% for 2020. The Stoxx Europe 600 Index has slipped 12%.

Locals Replace Foreigners in Turkey’s Record Stock Market Rally

Global equity markets were crushed as concerns over the impact on economies from measures taken to fight the coronavirus pandemic prompted a worldwide sell-off. As risk aversion among investors increased, the lira sank to a record-low against the dollar in May, triggering measures from Turkish policymakers to support the currency and the economy.

“This is a rally almost purely driven by the locals, which explains why Turkish stocks’ declines were relatively limited on some days of the global rout this year and outperformed many peers both in the developed and emerging markets,” said Burak Isyar, head of equity research at ICBC Turkey Yatirim in Istanbul. “A lot of local investors opened accounts during their home-stay time at the height of the virus outbreak.”

Fleeing the lower interest rates that have accompanied the government’s steps to protect the currency, locals have flocked to equities, leading to the longest winning streak since Bloomberg started tracking the Istanbul stocks benchmark in 1988.

Turkey’s main equity benchmark is showing signs of overheating already. The benchmark’s 14-day relative strength index soared to 83 points on Monday, the highest level since February 2017, and has remained above the level of 70 that signals a security may be overbought for almost four weeks.

“Could it continue like this? You never know, said Isyar. “It may extend gains for a while more before changing course. When it’s overheated like this, one negative global headline may suddenly trigger profit-taking.”

The benchmark index was 1.3% higher as of 11:35 a.m. in Istanbul, led by gains in banks. Shares of state-run Turkiye Halk Bankasi (IS: HALKB ) were up 6.2% following the resignation of Geoffrey S. Berman, the chief federal prosecutor in New York who was also leading a U.S. case against the lender.

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