Turkey Market Outlook: Political Calm Boosts Sentiment as Borsa Istanbul Rebounds

By Finance Expert Zeynel Balci, Hürriyet Gazette

After weeks of political tension surrounding the CHP Congress annulment case, Turkey’s markets finally found relief on Friday. The Ankara 42nd Civil Court’s decision to reject the lawsuit seeking to nullify the Republican People’s Party’s (CHP) 38th Congress helped lift a heavy cloud of political uncertainty over investors.

The ruling brought an immediate rebound in Borsa Istanbul, easing the political pressure that had overshadowed economic indicators such as inflation, the Central Bank’s rate cuts, and global market trends. While the foreign exchange market saw little reaction, bond yields declined, reflecting both delayed optimism and the impact of the Central Bank of Turkey’s (CBRT) 100 basis-point rate cut announced a day earlier.

Now investors are asking the key question:
👉 With political pressure easing, can the stock market sustain its recovery?

Political Relief Rally on Borsa Istanbul

The political risk premium that had weighed on the market for over a year began to fade, triggering a broad rally. However, analysts caution that politics remains only one piece of the puzzle.

The BIST 100 index currently trades about 5% below its August 26 peak of 11,600, and nearly 8% lower in dollar terms. After dropping to the 10,000 range in lira terms and 240 in dollar terms during recent turbulence, investors are now recalculating potential highs.

Whether Borsa Istanbul retests its previous peak or breaks new records will depend on the interplay of inflation dynamics, CBRT policy signals, and foreign investor appetite.

Key Market Drivers Ahead

📉 Inflation and Monetary Policy:
Rising September inflation has slowed expectations for further rate cuts. However, if October data show a softer reading, markets may reprice the outlook for continued easing — a scenario that could serve as a new catalyst for equities.

🏦 Earnings Momentum:
The ongoing Q3 2025 earnings season will play a critical role, particularly for the banking sector. Thursday’s Akbank results came in slightly above expectations, helping restore confidence that “the worst is behind us.”
Industrial firms, however, continue to face earnings pressure from inflation accounting, which keeps BIST 100’s P/E ratios at elevated levels.

💰 Interest Rates and Competition for Capital:
High yields remain the main rival to equities. A credible disinflation trend would strengthen the case for equities by narrowing the real-rate advantage of fixed income.

CBRT Signals Cautious Easing

The Central Bank’s 100 bps rate cut matched market expectations, but its policy statement stirred debate.
The bank acknowledged that “September inflation came in high, disinflation has weakened, and risks have become more pronounced,” while simultaneously pledging to maintain monetary tightness.

This apparent contradiction left many economists puzzled. Analysts suggest the easing cycle reflects concerns about slowing real activity and growing pressure from industrial lobbies demanding cheaper credit.

For now, the rate decision is viewed as “mildly positive” for markets, with October inflation data expected to determine whether further cuts follow.

Foreign Flows Remain Mixed

Foreign investors continued to tread cautiously.
According to CBRT data for the week ending October 17:

• Foreigners sold $178 million in equities but bought $151 million in bonds.

• It was the third consecutive week of stock outflows and second of bond inflows.

Following Friday’s political relief, foreign positioning will be closely watched in the coming sessions.

Meanwhile, gross international reserves rose by $8.7 billion to $198.4 billion, with $111 billion in gold and $87 billion in FX assets.
Domestic FX deposits also increased sharply — up $9.6 billion to $218 billion, signaling that local investors remain cautious despite the rebound.

Technical Picture: Resistance Levels in Focus

The BIST 100 index regained momentum, climbing sharply in a relief rally.
Immediate resistance levels stand at 11,150 and 11,350, followed by the major barrier at 11,600.
On pullbacks, 10,750 and 10,500 serve as primary support zones.

While short-term profit-taking may occur near resistance, the overall technical outlook remains positive as long as sentiment stays buoyant.

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