Political stability hopes raise BIST 100, strengthen TL

As soon as the AK Party came to power as the sole party, the expected political stability made investors happy, increasing purchases in the Borsa Istanbul, along with driving an increase in demand for assets in TL



With the results of Turkey's parliamentary elections pointing to political stability, domestic markets started the week by reflecting positive trends. After the Justice and Development Party (AK Party) returned to the single-party rule by winning 49.4 percent of the vote in Sunday's elections, the BIST 100 index of the Borsa Istanbul stock exchange was up 5.35 percent at 83,653 points after the opening on Monday – the highest the stock market has seen since July 14. Meanwhile, the shares of the Doğan Group and Koza İpek Group, which was recently seized after a judicial ruling, have hit rock bottom and failed to find buyers.Bond and share markets are expected to surge at the opening with the positive impact of foreign exchange rates, which have entered a downward trend and are being traded at the lowest level of the past two-and-a-half months. Analysts suggest that interest in Turkish lira-denominated assets might continue with the elimination of political uncertainties inside the country, and underlined that the 84,000-85,000 levels point to a major resistive position in the medium-term.The dollar has started to decelerate against the Turkish lira, causing the gold price per gram to drop to TL 101.34 ($36.03) - the lowest level since Aug. 17. Also, quarter gold coins and Cumhuriyet gold coins are being sold for TL 168 and TL 686, respectively. The lira gained 4.5 percent in value against other currencies in the interbank markets, and demand for lira-denominated assets in international markets has surged in the positive environment that follows the reinstatement of stability with the AK Party's election victory. The lira has reached the highest level of the past two-and-a-half months against the currency basket, which consists of 0.50 euros and $0.50, and the dollar and euro have dropped down to TL 2.80 and TL 3.07, respectively. Analysts suggest interest in lira-denominated assets has risen in Asian markets after the announcement of the election results. Meanwhile, the interest rate of two-year benchmark bonds has fallen below 10 percent. Following the appreciation of the lira against the dollar, the two-year compound interest rate, which was at 10.18 percent in the closure on Friday, has fallen to 9.67 percent - the lowest level that the benchmark bond interest rate has seen since July 10. The two-year compound interest rate of benchmark bonds followed a horizontal trend in the last trading day last week and ended the week at 10.18 percent. The compound interest rate of 10-year bonds, which was closed at 9.77 percent on Friday, has dropped to 9.24 percent. Also, the compound interest rate of 10-year benchmark bonds has declined to the lowest level of 9.22 percent since June 5 and is now at 9.27 percent.Analysts say the 9.50-9.60 percent segment for the interest rates of two-year benchmark bonds indicate a strongly supportive position in technical terms. It also underlines that markets will re-enter a trend that focuses on U.S. economic data after pricing is done in line with political and economic stability.As for foreign stock markets, after individual income taxes and the consumer confidence index fell short of expectations in the last trading day last week in the U.S., share markets have pursued a negative trend. The Dow Jones, S&P 500 and NASDAQ indices lost 0.52 percent, 0.48 percent and 0.40 percent of their value, respectively, on Friday. Also, the U.S.'s interest rate for 10-year bonds was balanced between 2.14 percent and 2.18 percent. With the foreign trade deficit continuing to decline and expectations rising for the post-election period in Turkey, the BIST 100 index ended Friday with a 1.11 percent increase.After the EU's data that was announced on Friday came in line with expectations, the dollar-euro parity increased from 1.0966 to 1.1072. Germany's DAX and France's CAC 40 indices appreciated 0.46 percent and 0.24 percent, respectively, as the U.K's FTSE 100 index dropped 0.54 percent.On the Asian side, the recently announced Chinese PMI (Purchasing Manager Index) remained below the expectations with 49.8 in October, enhancing the market's tendency to sell. Although Japan's Purchasing Managers Index for manufacturing industry has risen above expectations, Chinese data has escalated concerns about growth. As such, Japan's Nikkei 225 index lost 2.05 percent of its value and the dollar-yen parity dropped from 120.6 to 120. China's Shanghai compound index and Hong Kong's Hang Seng index depreciated by 0.2 percent and 0.64 percent, respectively.