Turkish stock exchange on a high

• BİST 100 up 32% in year to date
• Buoyed by hopes of Gulf peace
• Less risk of domestic political turmoil

The Turkish stock market is hitting record highs, buoyed by hopes of peace in the Gulf, overseas interest and a receding threat of political turmoil at home.

Borsa İstanbul’s blue-chip BİST 100 broke through the 15,000-point barrier early on Thursday before easing marginally to end the day at 14,917 points. Banking shares led the charge, rising 5 percent.

Wednesday’s climb took the BİST 100’s gains in the year to date to 32 percent, and 64 percent over the past 12 months – a rare positive in the battered Turkish economy.

Investors have been buoyed by reports that the conflict in the Gulf could de-escalate after the US stepped back from plans to escort vessels through the Strait of Hormuz, according to İris Cibre, financial markets executive at Istanbul-based Phoenix Consultancy. 

“The first thing that has impacted stocks positively is the news of a potential US-Iran deal within 48 hours and the gradual opening of the strait within 30 days,” Cibre told AGBI. 

The exchange has shrugged off higher-than-forecast inflation for April, with consumer prices rising 4 percent for the month to an annualised 32 percent, and weaker industrial activity, Cibre said.

Another factor is the deferral of a ruling in a case targeting the opposition Republican People’s Party (CHP), she said. A decision has been delayed until at least July. 

Though lower courts earlier dismissed the case, prosecutors have resubmitted charges that allege CHP chairman Özgür Özel and his supporters engaged in bribery and vote-buying at a 2023 national party congress, which saw long-time party leader Kemal Kiliçdaroğlu ousted. 

If the allegations are proven, the CHP could face closure or have its leadership removed from office and a state-appointed administrator named to run the party.  

Markets had been eyeing the court case with concern. The arrest in March last year of Ekram İmamoğlu, the CHP mayor of İstanbul and the party’s chosen candidate for the 2028 presidential election, caused the main index to drop 7 percent in a day. 

“If the court had made a surprise ruling it would have impacted stocks negatively and counterbalanced recent gains,” Cibre said. 

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Hande Şekerci, chief economist with investment firm İş Portföy, also based in Istanbul, said overseas investors were responsible for some of the surge in the market. Foreigners are also moving into local Eurobonds, lira bonds and lira overnight reference rate transactions, she said.

“We have seen foreign investor portfolio entry three weeks in a row since April 10,” Şekerci said. “This is due to a strengthening of global risk appetite.”

For stocks to maintain a more sustained appeal, Turkey’s central bank will need to return to its cycle of cutting interest rates, which would encourage domestic investors, Şekerci said.