Banks Prove Winning Bet for Turkish Money Managers in Wild Year

(Bloomberg) -- It’s been a tumultuous year for Turkish stocks. But, despite some wild swings, almost all local equity fund managers have achieved benchmark-beating performance.

Fifty out of 53 domestic equity funds outpaced the Borsa Istanbul 100 Index this year through Nov. 1, data from Turkey’s Electronic Fund Trading Platform show. That’s the best performance since at least 2014.

Holding bank stocks has proved a winning strategy.

“Banks are up some 16% in the period, so if you had high weighting on banks and got a few stocks with good returns, that immediately put your fund performance above the benchmark index,” said Burak Cetinceker, a fund manager at Strateji Portfoy in Istanbul. Cetinceker’s fund is among the top 10 performers this year so far, with a return of 27.5%.

Turkish money managers have had more than their fair share of turmoil to deal with in 2019. The first half was marked by a slowing economy, a fractious local government election, and the fallout from Turkey’s purchase of a Russian missile defense system. Since July, they’ve faced decelerating inflation figures and Ankara’s decision to send troops into northern Syria. The benchmark gauge climbed into a bull market in February, only to immediately plunge back into bear territory. July brought the second bull market of the year as the switchback ride continued.

Rate cuts, improved profits at Turkish companies, globally favorable risk sentiment among investors and the low base effect of comparing this year with 2018’s 21% slump in the benchmark “all supported gains in stocks, especially banks,” Cetinceker said.

Further gains could lie in store. Turkey’s attraction to foreign investors -- with the lira tamed for now and the highest real interest rates in emerging markets -- encourages the carry trade and supports the outlook for local equities.

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, John Viljoen, Jon Menon

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