Turkish Stocks Poised for Positive, Volatile November as Central Bank Easing Continues

Domestic Economic Agenda: Inflation Reports and Political Headwinds

Domestically, market focus will be tightly fixed on forward-looking guidance from the Turkish Central Bank (TCMB). Key events include the release of the final Inflation Report of the year on November 7th and the Financial Stability Report on November 28th. Investors will be particularly keen on the messages regarding the future trajectory of inflation.

Furthermore, the domestic political landscape remains a factor: news flow emerging from ongoing corruption investigations and geopolitical risks—primarily the Russia-Ukraine conflict, developments in the Middle East, and Syria—will be closely monitored.

BIST 100 Performance in October

The BIST 100 Index experienced a volatile month in October, initially weighed down by the main opposition party’s congress court proceedings. However, the index found support late in the month from the TCMB’s continued, albeit limited, interest rate cuts and the court’s dismissal of the opposition party’s case.

The BIST 100 finished the month with a limited decline of 0.37%, closing at 10,971.52 points. Performance was mixed across sectors:

• The Industrial Index ended the month with a modest gain of 0.32%.
• The Banking Index lagged significantly, posting a negative divergence with a 3.84% drop.

Monetary Policy Outlook: Continued Easing Expected

Following its rate cut cycle initiated in July and continued in September and October, we anticipate the TCMB to maintain its easing stance and deliver further interest rate cuts at its final meeting of the year.

Globally, the expectation that the US Federal Reserve (Fed) will continue its own rate-cutting cycle in December is crucial. This is expected to lead to an increase in capital flows towards Emerging Market (EM) economies, positively impacting Turkish Lira assets.

The combination of the Fed’s dovish shift, receding uncertainty over tariffs globally, and the underlying disinflationary trend in Turkey (despite seasonal monthly increases in inflation) supports the TCMB’s continued loosening cycle.

Analyst View: The expected continuation of the TCMB’s rate cuts suggests the economy is entering a rebalancing period. We anticipate this will primarily benefit interest-rate sensitive sectors, particularly the banking sector, and subsequently the real economy.

Investment Recommendation and Valuation

In light of these positive expectations, we anticipate the BIST 100 to display a positive and volatile trend throughout November. While the market may experience periodic pullbacks, we maintain our recommendation for gradual accumulation for medium- to long-term investment horizons.

Based on these expectations:

• We maintain our 12-month target of 13,500 points for the BIST 100 Index.
• This target represents a 23% potential return based on the current index value, leading us to reiterate our BUY recommendation.

The MSCI Turkey Index currently trades at a significant discount compared to the broader MSCI EM Index, with 2025 forward P/E and P/B ratios of 8.69x and 0.95x, reflecting discounts of 45.1% and 54.2%, respectively.

We are making no changes to our model portfolio this month.

Key Market Risks to Monitor

Investors should remain vigilant regarding the following risks that could derail the current positive sentiment:

• Geopolitical Escalation: The risk of hot conflict broadening in crisis regions, particularly Russia-Ukraine, and the Middle East.
• Fed Policy Pause: The Fed might pause its expected rate-cutting cycle due to the inability to access full economic data (e.g., due to US government shutdown), which would negatively impact EM flows.
• Trade Wars Resurface: New statements from President Trump regarding tariffs could reignite global trade tensions, despite recent progress.
• TCMB Cycle Interruption: The TCMB’s interest rate cutting cycle could be disrupted if the expected decline in inflation does not materialize.

Source:  Seker Invest Monthly Report