Banks Lead Advance in Turkish Stocks After Interest-Rate Cut

(Bloomberg) -- Turkish bank stocks led gains in the country after monetary policy makers cut rates further without causing a slump in the currency.

The Borsa Istanbul Banks Index, a gauge tracking the shares of lenders, climbed as much as 2.4% following the Turkish central bank’s decision to cut rates by 75 basis points, in a widely-expected decision. The Borsa Istanbul 100 Index traded 1.1% higher, near a new record it scored earlier Thursday.

With today’s rate cut, Turkish stocks found support after their recent advance due to compelling valuations amid renewed risk appetite globally. The Turkish central bank reduced the one-week repo rate by 75 basis points to 11.25% on Thursday, in line with economists’ estimates in a Bloomberg survey. The move added to 1,200 basis points of cuts since July. Last year’s retreat in rates made equities more attractive to investors than deposits.

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The central bank’s rate cut, which it described as “measured,” also helped to tame the lira as the currency appreciated 0.4% per dollar, squaring off a potentially negative impact on the nation’s stocks.

Here’s what some analysts are saying:

Ipek Ozkardeskaya, a senior analyst at Swissquote Bank:

• “Today’s reasonable cut is a sign that the CBRT’s dovish run is about to come to a pause, now that the rates have been pulled close to the inflation levels”
• The latest action should have limited or no impact on appetite for Turkish assets. Turkish stocks should see a double benefit: While lower rates should further boost investor appetite, the lira’s solid stance should help ease concerns regarding the FX-debt heavy company balance sheets

Akin Tuzun, a banking analyst at VTB Capital:

• The central bank’s 75bps rate cut came in line with the market consensus for the first time since it started cutting rates since July
• Says, the central bank is probably coming to “the end of the rate-cut cycle”
• “Banks have already benefited a lot from the previous cuts and this most recent cut’s additional benefit will be limited”

Nigel Rendell, a senior analyst at Medley Global Advisors LLC in London:

• Market appears to have digested the Turkish rate cut without ill effects
• The CBRT showed an element of restraint this time by cutting rates in line with market forecasts rather than doing more than expected, as was the case with all the previous four rate reductions last year
• The global environment is supportive -- easy monetary policies continue in the developed economies and the China/U.S. trade deal is helping at the margin to support investor sentiment

To contact the reporter on this story: Tugce Ozsoy in Istanbul at tozsoy1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, ;Onur Ant at oant@bloomberg.net, Jon Menon, Namitha Jagadeesh

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