Stocks are cheap. Nevertheless, this is the only argument one can bring forth. In the beginning of the year, I was expecting a wholly different picture.
Last week, we witnessed a record low on a dollar basis since September. BIST-100 turned up from $1.42 on the basis of USD/TRY movement – the lira has appreciated a bit, and overall equity futures, especially DAX.
MSCI Turkey EM spread has peaked. Turkish stocks were sold at 57 percent discount relative to EMs, the highest negative spread since 2008.
After the decision to repeat Istanbul elections, CDS has been up from 443 to 479. That is almost the same level as it was in March, the swap ‘thing’ and all that. It is lower than August 2018 though.
Well, the Turkish 10-year has hit 21.17 percent. So, the bond and equity markets move in tandem.
I don’t think non-residents’ bond holdings will go up any time soon. It takes either a higher rate or a ‘normalization’ with the U.S.
At 2020 PE of x4.8, the deep discount might work itself out at some point, but TRY stability, CDS and all that are key, as well as political stability.
Expect no trend before the June 23 Istanbul reelections. It is basically a roller-coaster, although this week we may see an upswing in equities and a drop in CDS. It will possibly be short-lived.