Turkish equities have performed strongly y-t-d, and indeed since Mehmet Simsek was reappointed as Finance Minister (June 2023). Top-down valuations still look attractive. Bottom-up, the picture is less compelling, but this note highlights five of HSBC analysts’ best Turkish stock ideas, the summary of which is presented below.
HSBC analysts write: In our view, both domestic macro and the global context are supportive. The overall picture looks sufficiently attractive to keep drawing in both domestic and foreign liquidity.
On the domestic macro stabilisation programme, HSBC economist Melis Metiner argues that soft landing the economy remains a priority, which means imbalances will be slow to adjust. Further tightening would help rebalance the economy at a faster pace, but we continue to expect a more gradual approach. From an equity strategy perspective, we argue that a slower pace of macro stabilisation (particularly given that it has, in any case, exceeded market expectations) might create a more benign environment for foreign investors wishing to position in Turkish equities.
A more dramatic tightening in policy would likely have led to a much stronger equity market rally, but much of the gain would have come immediately, and it would have been difficult for foreign investors to participate.
Türkiye best ideas: We outline our analysts’ best stock ideas. Sabanci Holding’s growth in energy provides resilience to its portfolio in a year of likely softer consumer demand and high interest rates; the discount to NAV highlights the valuation’s attraction. The ability of Turkish Airlines to leverage its young, diversified, and efficient fleet as well as the cost benefits from operating in Türkiye, continue to present a positive investment case. Elsewhere in the aviation space, TAV should start reaping the benefits of new investments starting this year, and becoming more visible next year, in terms of FCF and potential return of dividends.
BIM is our preferred play in the consumer space. It is the leading food retailer in Türkiye with a solid business model that is difficult to replicate at its current scale. Akbank is our preferred banking sector play as remuneration of reserves is an important catalyst.
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