Turkish Equities Still Have More Upside Potential ?

Once upon a time, there was a world of infinite liquidity. An old man with beard always lend his hands helping hands in order to keep the bewitching music going on and warms the cockles of all hearts. What a tale to make connection with the real world, nevertheless, I have to face that I need to work hard to be as good as Hans Christian Andersen.

Turning back to boring financial markets after a fairy FOMC preview, we firstly need to say that Turkish equities may still have more potential upside. Let’s take a look at the chart below comparing the Turkish equities index with MSCI emerging markets index.

MXEF vs XU100

This chart demonstrates that Turkish equities have been oversold through the last six month, due to deteriorating macro indicators and high politic risk arising out of Gezi Park protests  and Syrian conflict, but Turkey might close the gap within weeks.

One more indicator showing that Turkish equities are cheap, is the P/E ratios. Here’s a list of P/Es of some markets below (our source is Bloomberg here):

  • New Zealand Exchange 50 Gross Index: 18,29
  • Korea Stock Exhange KOSPI Index: 12,92
  • India’s BSE SENSEX Index: 18,27
  • JSE Africa Top40 Tradeable Index: 21,52
  • Russia’s MICEX Index: 5,20
  • Borsa Istanbul National 100 Index: 10,80
  • Ibovespa Brasil Stock Exchange Index: 7,90
  • iShares MSCI Emerging Markets: 12,00

Using these multiples, Turkish stocks are slightly cheap to buy now. Particularly, a trade-in is highly possible between South African assets and Turkish assets if we consider time-zones (in other words, there assets are traded at the same time).