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Borsa Istanbul Hits Record Highs: What is Driving the 2026 Turkish Stock Rally?

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As Turkish markets charge into 2026, the Borsa Istanbul (BIST 100) has set sail for uncharted territory, wrapping up a record-breaking opening week. The benchmark index closed at a historic 12,200.95 points, marking a 6.11% weekly surge and signaling a robust appetite for Turkish assets.

Having climbed 14.56% throughout 2025, the BIST 100 has already sprinted 8.01% higher in just the first six trading days of the new year.

The Five Pillars of the Current Rally

The bullish momentum is underpinned by a shift in macroeconomic fundamentals:

  1. Disinflation Momentum: 2025 inflation ended at 30.89%, beating most forecasts. Reasonable price adjustments in early 2026 have reinforced the “disinflation is here to stay” narrative.

  2. Imminent Rate Cuts: Markets are pricing in a 100 to 150 basis point cut by the Central Bank (CBRT) at the upcoming January 22 meeting.

  3. Collapsing Risk Premiums: Türkiye’s CDS (Credit Default Swap) has dropped to approximately 200 bps, the lowest level since 2018.

  4. Bond Yield Compression: The 2-year benchmark bond yield tested recent lows at 36.5%, indicating a rotation back into fixed-income and equity valuations.

  5. Foreign Inflow Renaissance: Foreign investors were net buyers of $2.3 billion in stocks in 2025, with early January data showing a continued appetite.

Valuations: Still a 67% Discount

Despite the record highs in Lira terms, the index remains attractive in Dollar terms. Currently trading at $282.80, the BIST 100 is still well below its 2024 peak of $344.70.

According to Garanti Investment’s 2026 Strategy Report, the market is trading at a Price-to-Earnings (P/E) ratio of just 5.1. This implies a massive 67% discount compared to its emerging market peers. Garanti has set a fair P/E target of 7.4, translating to a BIST 100 target of 16,100.

“Barring sharp global liquidity shocks or energy price spikes, a sovereign credit rating upgrade for Türkiye is likely to be the main market theme for 2026.” — Garanti Investment Report

The Road Ahead: 15,000 and Beyond?

Investment houses are increasingly aligned on the upside potential. Kuveyt Turk Investment has set a target of 15,250 for the XU100, citing:

  • Real appreciation of the Turkish Lira.

  • The waning impact of inflation accounting on balance sheets.

  • Determined disinflation efforts by the economic administration.

The overarching theme for 2026 is clear: Declining inflation and falling interest rates are expected to catalyze corporate profitability and trigger a re-rating of Turkish equities.

Source:  Turkiye Today

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