Foreign Investors Eye Turkish Stock Market in 2025: İş Yatırım

January’s meetings with international investors have drawn significant foreign interest, suggesting a potential net buying trend in Turkey’s stock market for 2025. The optimism is driven by improved economic indicators and favorable macroeconomic policies despite global financial challenges.

 

As 2025 begins, global markets face headwinds, including the Federal Reserve’s slowing interest rate cuts, a stronger US dollar, and rising long-term government bond yields. Emerging markets historically struggle under such conditions. However, countries implementing sound policies, such as Turkey, have an opportunity to outperform.

Turkey’s strong start to the year is bolstered by several factors: a moderate minimum wage increase below past inflation, better inflation dynamics, and a gradual approach to interest rate cuts. These developments have enhanced foreign investor confidence, particularly in discounted block sales and public offerings by large firms. Even with limited Fed rate cuts and rising bond yields, Turkey could stand out positively among developing nations, as it did in early 2024.

The Central Bank of the Republic of Türkiye (CBRT) will likely continue its interest rate cuts throughout 2025, a strategy that will influence key investment themes. The banking sector is expected to benefit significantly from these cuts, supported by eased restrictions on credit growth, lower inflation, and increased foreign capital inflows. Real estate investment trusts (REITs) also show promise, driven by revived housing demand, lower inflation, and dividend distribution incentives for tax benefits.

In the services sector, telecommunications and aviation are poised to maintain profitability. Meanwhile, food retail could face slowing nominal growth due to modest wage increases, though reduced inflation accounting will ease pressure on margins.

Industrial sectors may see limited demand recovery, with defense, cement, and energy industries expected to outperform. High defense expenditures, reconstruction efforts in Syria, and potential peace agreements in Ukraine may support growth in cement production. Energy companies will benefit from expanded renewable energy capacity and favorable comparisons to 2024’s low electricity prices.

Model Portfolio Overview

The model portfolio allocates 30% to banking stocks, a sector positioned for strong profitability in 2025. Garanti Bank (GARAN.IS) leads with robust financials and high returns, while holdings in Akbank and Yapı Kredi, as well as TSKB (TSKB.IS), offer diversification and growth potential.

Holdings like Sabancı Holding (SAHOL.IS) and Koç Holding (KCHOL.IS) retain a 25% portfolio weight, leveraging attractive valuations and quality subsidiaries. Sabancı Holding trades at a 47% discount to its net asset value, highlighting its long-term investment appeal.

 

 

Source: İş yatırım

Translation: Cem Cetinguc

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