Strategy: Markets Eye Inflation Data, CBRT and S&P Review as Q4 Begins

Summary:

Turkish markets enter October with a focus on inflation data, the Central Bank’s rate decisions, and S&P’s upcoming credit rating review. While Borsa Istanbul ended September on a weak note, analysts expect monetary easing, supportive global flows, and easing geopolitical risks to set the stage for a rebalancing in the final quarter of the year.

Key Domestic Drivers in October

Investors are closely watching September inflation data due October 3, as well as the CBRT’s October 23 monetary policy meeting. Markets will focus not only on the interest rate decision but also on forward guidance.

Beyond macro indicators, domestic politics — particularly ongoing corruption investigations — and geopolitical developments in Ukraine, the Middle East and Syria remain critical risks.

A significant highlight will be S&P’s October 17 review of Turkey’s sovereign rating. While an upgrade is unlikely, the agency’s outlook and guidance will carry weight for investor sentiment.

Borsa Istanbul Ends September Lower

September was marked by volatility in Turkish equities, reflecting political uncertainties and global risk sentiment.

The BIST 100 Index ended the month down 2.44% at 11,012 points, despite late-month optimism following reports of a planned meeting between President Erdoğan and U.S. President Trump.

• Industrial Index: -2.65%

• Banking Index: -4.48%, underperforming the broader market

CBRT Rate-Cut Cycle in Focus

The Central Bank of Turkey (CBRT) has been in a rate-cut cycle since July, continuing with another cut in September. Analysts expect the CBRT to maintain its easing stance in the final two meetings of the year, citing the downward trend in inflation.

Globally, the U.S. Federal Reserve’s September rate cut has improved flows into emerging markets, boosting appetite for Turkish lira assets.

Outlook for Q4: Rebalancing Ahead

If the Fed continues easing, geopolitical tensions ease, tariff-related uncertainties subside, and no new domestic shock emerges, analysts expect a new phase of economic rebalancing in Turkey during Q4.

This would primarily benefit the banking sector, with spillover effects into the real economy.

Accordingly, Borsa Istanbul is expected to show positively volatile performance in October, with analysts maintaining a constructive outlook.

Recommendation: “Buy” Rating Maintained

Analysts recommend a gradual accumulation strategy for medium- to long-term investors.

• BIST 100 12-month target: 13,500 points

• Upside potential: 23% from current levels

• Valuations: MSCI Turkey trades at 8.80x P/E and 1.00x P/B on 2025T, representing discounts of 42.6% and 49.6% versus the MSCI Emerging Markets index.

No changes were made to the model portfolio this month.

Market Risks

Key risks identified by analysts include:

• Escalation of Russia-Ukraine and Middle East conflicts

• Higher-than-expected inflation leading the Fed to pause its rate cuts

• Renewed trade war rhetoric from President Trump

• A halt to the CBRT’s easing cycle if inflation fails to decline as expected