Market Optimism Returns as Turkish Assets End the Year on a Stronger Footing

Investor sentiment in Türkiye has improved toward the end of the year, supported by easing inflation expectations, central bank rate cuts, and renewed foreign inflows. With political risks temporarily receding and monetary policy signaling continuity, markets are entering the final stretch of the year with cautious optimism.

Optimism has resurfaced in Turkish financial markets as the year draws to a close, with investors increasingly positioning for a more constructive outlook in the year ahead. The BIST 100 index ended last week up 2.76% at 11,311 points, reinforcing hopes that the market may sustain its upward momentum if it holds above the 11,300 level.

Market participants say that in the absence of adverse political or macroeconomic developments, the benchmark index could target the psychological threshold of $300 in dollar terms, a level closely watched by both domestic and foreign investors.

Political risk recedes, expectations stabilize

Investor confidence has been shaped by a calmer political environment following the resolution of several high-profile legal cases that had dominated headlines earlier in the year. Those developments had previously weighed on sentiment, pushing investors toward fixed-income instruments after the central bank temporarily tightened policy in response to market volatility.

By contrast, the current environment is marked by declining inflation trends and renewed confidence in monetary policy. Türkiye’s central bank cut its benchmark one-week repo rate by 150 basis points to 38% at its latest meeting, in line with market expectations.

Central Bank Governor Fatih Karahan said last week that the disinflation process remains intact and that the bank will maintain a tight monetary stance to ensure the durability of the downward trend in inflation.

Global central banks stay predictable

Internationally, markets were also focused on the U.S. Federal Reserve, which delivered a widely expected 25-basis-point rate cut. With major central banks largely meeting expectations, global risk appetite has remained supportive, allowing emerging market assets to regain some traction.

Meanwhile, Türkiye has entered negotiations on the 2026 minimum wage, with the Minimum Wage Commission holding its first meeting. The next round of talks is scheduled for December 18, a process that investors are monitoring closely for its potential inflationary impact.

Key data ahead, but no major shocks expected

This week’s domestic data calendar includes the budget balance, housing price index, home sales figures, the summary of the central bank’s policy meeting, and the consumer confidence index. Analysts say none of the scheduled releases are expected to trigger major repricing, suggesting that local markets may continue to trade largely on internal momentum.

Globally, investors will be watching interest rate decisions from the European Central Bank and the Bank of England, as well as U.S. inflation and non-farm payrolls data.

BIST eyes new local-currency highs

If the BIST 100 index remains above 11,300 points, analysts say resistance levels around 11,500–11,600 could come into focus. Beyond that, market participants see the possibility of new all-time highs in local-currency terms.

Looking further ahead, several brokerage houses forecast that the index could reach 14,000 points or higher in 2026, assuming macroeconomic normalization continues.

Foreign investor interest has also shown signs of recovery. Turkish equity ETFs listed in New York recorded a $22 million inflow last week, the largest weekly inflow since June 2023. Central bank data further show that foreign investors purchased $71.9 million in equities and $239.1 million in bonds during the week of November 21.

These developments have reinforced expectations that Türkiye’s markets may enter the new year on firmer ground, even as risks tied to inflation, politics, and global monetary conditions remain closely monitored.

Source: Mr Ufuk Korcan, Dünya Gazetesi

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