TURKEY MARKET OUTLOOK - Curbing bank sector’s weight
We switch to a less aggressive portfolio by cutting banks to ‘Market-weight’ from ‘Overweight’ after their outperformance since August 2018. We believe investor interest in banks will return once the regulators acknowledge the banking sector’s asset quality issues and agree on the magnitude of haircuts and transfer NPLs to an asset management body.
We remain constructive on the market given 1) the dovishness of global central banks which supports the carry appetite for TR assets, 2) the light position of fixed-income investors in TRY denominated bonds, 3) likely disappearance of the current account deficit in summer, and 4) CPI falling to 10% in September. We see slightly positive GDP growth for 3Q19 (up to 1% at best). Despite the 26% surge in TR equities from May 2019 lows, multiples are not stretched. TR trades at 49% discount to EM vs the 31% five-year average discount. On the negative side, we expect S-400 deliveries starting in July to result in CAATSA sanctions.
We add Petkim and Hektas to our model portfolio. Garanti is our top pick, while we now add Yapi Kredi Bank to our least preferred list.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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