Risk premiums on Turkish stocks may be rising and the spectacular gains seen this year in Istanbul have slowed, but peer-beating money manager QNB Finans Portfoy says the market still holds attractions.
“We are not highly negative on Turkish stocks, because they get cheap for foreign investors even if they don’t move,” helped by a declining lira and lower price-earning valuations, said Egemen Erden, the firm’s general manager.
Its equity intensive fund is Turkey’s best performer this year, after Is Portfoy’s index-tracking BIST Technology Stocks fund, according to the Turkey Electronic Fund Platform, known as Tefas. QNB Finans Portfoy’s fund has returned 55% in 2017, compared with a gain of 39% for the benchmark Borsa Istanbul 100 Index.
Supported by the Credit Guarantee Fund – which the government created in 1991 and drastically expanded last November – an increased global appetite for risk and strong company earnings estimates earlier this year, Turkish stocks have been among the biggest global gainers in 2017. That advance has slowed as perceptions of risks around Turkish assets shot up following the visa spat with the US that flared last month and as investors paused to assess the outlook.
QNB Finans Portfoy’s performance was helped by a partial cut in its weighting in bank stocks following second-quarter earnings, Erden said. Istanbul’s index of bank stocks lost 4% in the third quarter compared with a gain of 2.5% for the benchmark.
What really fuelled the fund’s outperformance, however, was its “company picks,” Erden said. He cited bets on Petkim Petrokimya Holding, Tupras Turkiye Petrol Rafinerileri, Yatas Yatak ve Yorgan Sanayi ve Ticaret and Turkish steelmakers as producing good returns.