It may be too early for a correction in Turkish stocks.
Bears who sent the benchmark Borsa Istanbul 100 Index to the biggest monthly loss since May 2016 are already in retreat as technical indicators suggest the buying momentum has returned this week. If anything, the September selloff left the nation’s equities more attractively valued than any time in the last eight years.
Turkey is among the world’s 10 best-performing markets this year, with the Istanbul gauge advancing 34%. However, a surge in oil prices during the third quarter and the central bank’s tightening policy amid rising inflation pushed some investors to reallocate funds to crude-exporting countries such as Russia.
That sent the main equity index’s price-earnings ratio, based on 12-month forward estimates, to the lowest since June 2009 relative to its emerging-market peers. Those who had shorted Turkish stocks, or stayed on the sidelines this year, said they would double down on their bets against the country.
But stocks are rebounding, on course for the biggest weekly gain since August 25. The proportion of Borsa Istanbul 100 members with a buy signal is at its highest since December, according to a moving-average study commonly known as MACD. Last month’s pullback offered investors a chance to increase exposure to the country’s banks, Credit Suisse Group AG analysts said Wednesday.
The bears stumbled on the first hurdle as stocks stopped falling after reaching a Fibonacci level. While last month’s decline erased 23.6% of the gains made since December, further losses didn’t materialise as the retracement line acted as a support. That means the bullish momentum in Turkey’s stocks remains intact.