Turkish stock market investors could not find the return they hoped for this year in the volatile market. The nominal return of the Borsa Istanbul (BIST TUM Index), which closed 2022 with an increase of nearly 200 percent in nominal terms and 80 percent in real terms, remained at 37 percent this year.
Experts say that deposit interest rates will rival the stock market in 2024 and that stock market investors should not expect big returns in the first half of the year, while making more hopeful comments for the second half of the year.
While Borsa Istanbul left behind a very volatile year; investors are preparing to enter the new year with many question marks in mind. While it has gained 37 percent since the beginning of the year, it has risen 65 percent since the end of the elections. The stock market, which is still seen as a hedge against inflation, has more alternatives in 2024.
Experts who spoke to the EKONOMİ newspaper pointed out that 2024 should be divided into two, while predicting an economic slowdown due to the local elections to be held in March and the monetary policy to be followed afterwards, as well as the forecasts for the continuation of the high course of inflation and interest rates. The strongest competitors that will stand against Borsa Istanbul in the new year are rising TRY deposit rates, long-term TRY bonds and Eurobonds. As such, it will be much more important to choose the right company at the right time in 2024.
On the other hand, in the stock market, where foreign investor inflows have continued uninterruptedly for 7 weeks, it is pointed out that this will continue and it is predicted that the eyes of foreign investors will be on how the economic policies will be shaped after the local elections. In addition, the fact that Turkey’s 5-year credit risk premium (CDS) is below 300 basis points and the forecasts that the positive trend will continue in the next year strengthen the interest of foreign investors.
While the number of investors in the stock exchange broke its historical record by exceeding 8.5 million, 54 companies were offered to the public in 2023 and it was calculated that more than 2 million investors came to the stock exchange with these public offerings. While it is observed that this has deteriorated in the last month in IPOs that went ‘through the roof’ throughout the year; experts expect ‘normalization’ in 2024 and point to the importance of foreign inflows to IPOs.
BIST 100 IN 2023
While the BIST 100 index broke its historical record with 8562 points on October 3; the transaction volume record in the index was TRY 224.9 billion on August 24. In dollar terms, the index lost more than 12 percent of its value. The top 3 most profitable stocks in 2023 were Tetamat Gıda with 990 percent return, Ray Sigorta with 950 percent return and Politeknik Metal with 867 percent return. The biggest losers were Çan2 Termik with 67 percent, Imaş Makina with 66 percent and Penta Technology with 65 percent. When we look at the best return performance on an index basis, the insurance index stood out with a 150 percent gain; followed by the SME industry index with 112 percent. The mining index lost the most with 18 percent.
Experts share their projections for 2024:
Deniz Investment Deputy General Manager Cumhur Ornek:
2024 will be different from the last two years
“Next year, both the financial theme in our economy and the dynamics in the stock market will be quite different from the last two years. After the transition to a positive real interest rate policy, we observe significant changes in the balance of pricing and investors’ decision-making processes. We think that we will continue to see the positive effects of the monetary policy, which is shaped according to inflation realizations and expectations, on the risk premium. In this context, deposits, especially long-term bonds, have become attractive for investors. We expect this trend to continue. And we even think that the course of credit risk premium below 300 basis points will strengthen the foreign perception. On the other hand, the rigidity in inflation above expectations and possible progressive steps to be taken towards growth in public finance may weaken this perception. Our favorite and preferred sectors in Borsa Istanbul are banking, retail, insurance and aviation. Our fundamental expectations for these sectors are strong. However, the rises in alternative yields tell us that in addition to sector and stock selection, another issue should be highly considered; Timing. We would like to remind our investors that they should take these three variables into account next year and not hesitate to realize profits in stocks that reach certain valuation levels.
Info Investment Deputy General Manager Mert Yilmaz:
IPOs may have a break in the short term
“The most important agenda for 2024 seems to be the local elections in March. In fact, it is not realistic to expect a local election to have such an impact on market pricing. However, what the market is curious about is whether the economic policy, which has changed after the elections, will continue after the local elections. Could the outcome of the elections lead to a change in policy and/or economic management? Our job will be much easier if the markets are given the message that the tight monetary policy steps, which we can define as normalization steps, will continue until the desired target is achieved regardless of the election results and if confidence can be established.” Stating that the TRY is more likely to appreciate in real terms, especially until the local elections, Yılmaz said, “Although the stock market has upset its investors in recent days, it will close the year with positive returns in nominal terms. In the short term, I think that IPOs will have a break, new investor inflows to the system will be very limited, and there may even be a net decrease in the number of investors. However, with the falling CDS premium and the normalization in policy, a total of USD 3.2 billion of money has entered the stock market in the last seven weeks, USD 1.5 billion of which was in the stock market. I think the inflow of money from the foreign investor front will continue. However, the rising deposit interest rate has brought back the ‘stock market-interest rate competition’. It is not realistic in the short term to expect fresh money to enter the stock market from domestic investors. Therefore, we need foreign investors. The size of the credit in the system is one of the important risks and we are experiencing the pressure created by this risk these days. In 2024, I think the stock market will continue its upward trend. However, we should not forget that it is necessary to be realistic in terms of return expectations in a conjuncture where the risk-free return reaches the 50 percent limit. However, the “stock market is unrivaled” discourse is no longer realistic. We are entering a period where investors need to think more in the medium-long term. Sector and stock selection is very important.”
ALB Investment General Manager Ibrahim Cetin:
Critical points for stock selection in 2024
“The year 2024 should be divided into two parts. In the first half of the year, inflation and interest rates are likely to remain at high levels and there will be some slowdown in the economy. Pressure may increase on the stocks of companies operating in growth-sensitive and highly demand-elastic sectors, which may also be negatively affected by high loan rates. On the other hand, I believe that aviation, food and clothing retail, food and beverage, telecom, insurance, banking and holding sectors, which have low demand elasticity, are discounted and may see possible foreign purchases, may diversify during the first half of 2024; they may also provide returns above the index, inflation and interest rates. In the second half of the year, if annual inflation, which is expected to decline, is accompanied by an easing in interest rates and financial conditions, a positive outlook may begin in growth-sensitive and discounted sectors. In this context, we may see relief in iron and steel, automotive, white goods, cement, textile, glass industry, construction, furniture and other durable consumption sectors.” As a portfolio basket recommendation to investors in 2024, Cetin suggests a 40-45 percent of stocks, 30-35 percent of TRY deposits, Eurobonds and bonds and 20-25 percent of gold.
Inveo Portfolio Fund Management Director Eral Karayazici:
Noticeable increase may start in Q2
“In the first 3-4 months of 2024, I believe that Borsa Istanbul can show a moderate performance, followed by a strong positive performance. Borsa Istanbul has been floating horizontally in the 260-280 dollar range for two months. In the first part of next year, this fluctuation band may increase to the range of 280-300 dollars. However, I think that the main noticeable increase may start in the second quarter of the year and Borsa Istanbul may complete the year 2024 near 400 dollars.”
Economist Serdar Pazi:
Two important milestones of 2024
“While expressing positive expectations for the new year, it is important to note that the current domestic balance is being challenged by ongoing IPOs and rising deposit rates and credit conditions. Therefore, it can be stated as a prerequisite that foreign investors are likely to take positions in the index with an increasing allocation to Turkey. The local elections to be held at the end of March in Turkey and the US Federal Reserve’s (Fed) start of interest rate cuts abroad can be considered as two important milestones. Domestically, with the minimum wage increases, the hottest topic of the coming month, we may see activity in the retail sector, especially in food and clothing. Increasing foreign interest in banks is likely to have a positive impact on large holdings that hold these companies on their balance sheets. Domestically, electricity and electricity distribution companies will be in demand with the incentives for renewable energy. With the current weak situation in Europe and the depressed course of exchange rates, export-oriented companies, especially automotive and white goods, may follow a relatively weaker performance. Increased construction activities, especially post-earthquake activities, may bring project-based REIT companies to the forefront, especially cement.”