While global stock markets have lost ground as they assess recovery hopes against a spike in coronavirus infections that could derail a rebound in business activity, Turkey’s benchmark equities gauge has erased its 2020 drop with recent performances.
Torn between record stimulus and growing fears of a second wave of infections, stocks have been moving sideways in recent weeks after rising more than 40% from March lows on hopes the worst of the pandemic was over. A recent rise in coronavirus infections in parts of Europe and the United States has fueled fears of a setback to the nascent economic recovery as they reopened their societies and economies.
Borsa Istanbul’s BIST 100 Index closed Monday at 115.190 points, the highest close since Feb. 21, gaining as much as 1.39% from the Friday close of 113.61. The index has climbed over 37% from its March 23 low of 84.25.
The index was up 0.63% at 115.92 points at 3:35 p.m. local time Tuesday. During the day, the index’s lowest level was 115.56 points, while the highest was 116.279 points. The BIST 100 index had started the week at 114.71 points.
Turkish stocks have outpaced developing-nation peers, with the MSCI emerging-market index still down 10% for 2020. The Stoxx Europe 600 Index has slipped 12%.
The BIST 100 has been one of the five indexes that compensated for losses in local currencies worldwide, along with stock exchanges such as the Nasdaq Copenhagen, formerly known as the Copenhagen Stock Exchange, Lithuania’s Nasdaq Vilnius and Latvia’s Riga Stock Exchange, Bloomberg HT reported Tuesday.
European stock markets on Tuesday were boosted by better-than-feared business activity surveys for June. The purchasing managers' index was just shy of the level that indicates the economy is growing again after a devastating plunge in the spring.
France's CAC 40 gained 1.6%, while Germany's DAX rallied 2.5%. Britain's FTSE 100 gained 1.3%.
The European markets had traded broadly lower Monday.
Global coronavirus infections topped 9 million on Monday shortly after the World Health Organization (WHO) warned that the pandemic was accelerating. The illness has killed over 469,000 people worldwide since the outbreak began in China last December, according to figures compiled by the U.S.' Johns Hopkins University. The U.S., Brazil and Russia are currently the countries hardest hit in the world.
"Almost every day we reach a new and grim record," said WHO chief Tedros Adhanom Ghebreyesus on Monday, noting that more than 183,000 new cases were reported to the WHO on Sunday – easily the most in a single day so far.
The BIST 100 index had started 2020 at over 114.000 points and hit the highest level of 123.556 points on Jan. 21, while it saw the lowest level of 84.246 on March 23 amid the pandemic.
Investment Consultancy Manager at Gedik Investment Üzeyir Doğan said the resignation of Geoffrey Berman, the chief federal prosecutor in New York who was also leading a U.S. case against the Turkish state lender Halkbank had an impact on the rally in the BIST 100 on Monday.
Shares Halkbank closed the day Monday up 5.56%, after surging as much as 9% within the day. Shares traded 2% lower Tuesday.
An extraordinary standoff between the U.S. Justice Department and Manhattan U.S. Attorney Berman ended on Saturday when the prosecutor agreed to step down as U.S. Attorney for the Southern District of New York, the office that had been investigating President Donald Trump's personal lawyer, Rudolph Giuliani.
Berman's confirmation of his departure came after Attorney General William Barr told him he had been fired by Trump at Barr's request, and that Berman's hand-picked No. 2, Deputy U.S. Attorney Audrey Strauss, would become Acting U.S. Attorney until a permanent replacement is installed.
U.S. prosecutors accused Halbank of helping Iran evade U.S. sanctions in a case that has strained U.S.-Turkey relations. The Turkish bank denied any wrong-doing. Charges were announced last October and followed related charges brought by U.S. prosecutors against nine individuals since 2016.
They included former Halkbank executive Mehmet Hakan Atilla, who was convicted in January 2018 after another defendant, Turkish-Iranian gold trader Reza Zarrab pleaded guilty and testified against him.
Atilla returned to Turkey last year after leaving prison and became general manager of the Borsa Istanbul Stock Exchange (BIST).
The lender in late March pleaded not guilty to the charges in a federal court in Manhattan. The case accused Halkbank of using money servicers and front companies in Iran, Turkey and the United Arab Emirates to evade sanctions through sham transactions in gold, food and medicine.
“This (Berman's resignation) has also strengthened expectations that the case process in the U.S. could end positively,” Doğan told Bloomberg HT.
Analysts had pointed at 111.000 level as a resistance level for the BIST 100, however, the index broke the resistance point and has set its eye on 115.000 level. In case it breaks this level as well, analysts think the index could climb to as much as 120.000 points. They are also said to agree that surpassing the 120.000 resistance level could herald a major jump.
Eyes on central bank’s rate decision
Investors and markets’ eyes this week will be on the sixth Monetary Policy Committee (MPC) meeting of the Central Bank of the Republic of Turkey (CBRT), which is expected to continue its rate-cutting cycle after it lowered its policy rate for a 9th straight time last month.
The bank is expected to trim its policy rate by 25 basis points to 8% on Thursday, according to a Reuters poll, a relatively limited cut in an aggressive easing cycle that has lasted nearly a year.
The bank has slashed its key interest rate by 1,575 basis points since July last year, when it stood at 24%, in a muscular bid to stimulate the economy and, more recently, to counter the economic downturn brought on by the coronavirus outbreak.
In the Reuters poll of 16 economists, the median estimate was for a cut to 8%. Estimates ranged from no change in the policy rate at 8.25%, to a 50-point cut to 7.75%.
Since the outbreak hit Turkey, the central bank has slashed rates by 250 basis points, bought record amounts of government bonds and provided some funding below the policy rate.
Enver Erkan, an economist at Tera Yatırım, said the policy flexibility had narrowed after the year-long monetary easing.
“Interest rates are below inflation and we have gotten close to the central bank’s year-end inflation estimate,” he said, adding that the bank would likely stick to small cuts or stand pat in the coming months.
With the outbreak hitting domestic demand, tourism and exports, the bank last month lowered its inflation forecast for end-2020 to 7.4%.
Plummeting global oil prices have pushed inflation down in energy import-dependent Turkey. The inflation climbed more than expected to 11.39% year-on-year in May, according to the Turkish Statistical Institute (TurkStat) data. May's annual inflation was up from 10.94% in April. Month-on-month, consumer prices rose 1.36% in May.
The median estimate of 11 economists for the policy rate at year-end stood at 7.75%, down from 8% last month, with forecasts ranging between 8% and 7.25%.
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