Equities Still Have Legs
The remarkable rally in Turkish stocks since the start of the year (up by almost 40% year-to-date) shows no signs of stopping, and we hold to our view that the index will hit 70,000 before the end of the year. We previously highlighted the break at 63,800 as a particularly bullish signal and the index has since chalked up gains of 6.8%. In particular, the central bank ' s recent shift towards monetary easing has helped push bank stocks higher in particular .
|Onwards To 70,000|
|Turkey - ISE-100 Equity Index & RSI|
That said, we warn that with the relative strength index (RSI) now in overbought territory, the index could be due a short-term correction . Moreover, Turkish equities are no longer as cheap on a regional or historic basis (12-month forward price/earnings ratio is back to early 2011 levels). For the index to push beyond 70,000 in the near term, we would need to see a significant improvement in earnings yield, which remains unlikely in our view. Indeed, while export dynamics have been improving the past few quarters, domestic companies are facing a tougher environment amid slowing consumer demand.