Reached the highest profits in its history! Banks carry the stock market.

The rally in Borsa Istanbul continues under the leadership of banking shares. There is a high volume and widespread movement. Locomotive banks at the exit. The bright balance sheets of the banking stocks for the first half of the year have paved the way for the exit. While banks reach their highest profits in history, balance sheet valuation ratios such as price earnings and market value/book value (PD/DD) still maintain their low (discounted) appearance (not recommended). While the average price-earnings ratio of the BIST100 Index is 5.8, the price-earnings ratio is still well below this, despite the sharp outflow in some bank stocks. The high premium seen in the banking sector last week was partly due to the decline in the bond interest rates after the CBRT’s loan arrangement. Profit expectations for the balance sheet of the next period have been positively affected due to the increase in the interest income of the banks holding bonds and bills (GDDS). We will watch and see if there will be a stock change with the exit or if other groups will take the locomotive function from the banks.


However, foreign money inflows continue. According to CBRT data, foreign investors bought 366 million dollars in stocks in the week ending August 19. This was the highest consistent weekly purchase in a 9-month period. In the first three weeks of August, the total amount of foreign purchases reached 724 million dollars. Foreign share in stocks in Borsa Istanbul exceeded the level of 35 percent and reached its level in June. At the beginning of August, it had seen the level of 32.74 percent. Priority will be given to the continuation of money inflows for the continuation of the exit movement in Borsa Istanbul, which shows a positive divergence from foreign exchanges. In addition, the evaluations that the discounted stocks are too high and the search for returns against inflation are the reasons that contributed to the exit in the stock market. It is difficult to say anything about its future course, but when we look at the returns of investment instruments since the beginning of the year, the stock market is far ahead of the others. Sensitivity to parameters such as the agenda, foreign markets and the need for expectations has weakened considerably due to the effect of money inflows. Although this view is preserved for now, it is not a situation that will show continuity. Markets will return to their usual evaluation criteria after a while. At this stage, optimism due to money inflows continues.


While domestic markets are roasting with their own oil, the weight of developments originating from the Fed continues outside. It would be fair to say that the markets spent the last week waiting for Fed Chairman Powell’s speech at the Jackson Hole meeting. The speech, like the previous ones, wasn’t dove, of course, but contrary to expectations, it wasn’t more hawkish either. Powell: “While lower inflation figures for July are welcome, a single month’s improvement falls far short of what the Committee needs to see before it is sure inflation is falling. At some point, it may be appropriate to slow the pace of increases as the monetary policy stance tightens further. We will continue the tight monetary policy until we are sure that the job is done. The size of the rate hike in September will depend entirely on the data,” he said. While pointing out the continuation of the current policy, it is noteworthy that there will be a slowdown in the interest rate increase momentum in the future. The possibility of a 50 or 75 basis point rate hike for the Fed’s September meeting has not become clear. In this respect, the US non-farm employment data to be announced on Friday (expected 290 thousand, previous 528 thousand) and September inflation will be the determining factor in the dose of the rate hike.


After Powell’s speech, stock markets saw the ‘pain’ side of the continuation of monetary tightening and the declines in the US and German stock markets gained momentum. The Euro/Dollar parity could not hold above the 1.00 level, while the US dollar appreciated, the Dollar Index, which shows the change of the US dollar against six currencies, especially the Euro, continued to rise above the 108.00 level. The US 10-year bond rate remained above 3.00 percent. Depending on these developments, the weak outlook in the ounce price of gold continued. In the oil price, the support of some members to the call of Saudi Arabia to cut production at the next OPEC+ meeting brought about the rise. However, Brent Oil failed to exceed $100 and experienced a pullback. Despite the news that a nuclear deal with Iran is imminent, the possibility of Iranian oil coming to the market has not yet been included in the pricing. The troubled process in Europe continues with the energy crisis, high inflation, drought and recession concerns. This is among the reasons why the Euro remains weak. There is a fluctuating course in Asian markets. Following the decision of the People’s Bank of China to cut interest rates, an incentive package of 146 billion dollars was announced to support the economy. Japan Tokyo Region CPI was 2.9 percent year-on-year (previously 2.5 percent). Inflation is testing these levels for the first time in many years.


The rally in the stock market continues. The fact that incoming profit sales remain at the technical level of correction and recover in a short time is important in terms of showing the strength of the exit movement. Initial supports are at 3.050-3,000 levels. Above the 3,000 level, the uptrend can be maintained. The next support points are located at the 2,900-2,800 levels. Initial resistance is at 3.190-3.200 levels. Profit sales may come at these levels. Above 3.200, further resistances are seen at 3.300 and 3.500 with the continuation of the rise. Although the exit trend remains strong in the index, profit sales can be seen.


Turkey’s 2nd Quarter 2022 growth (GDP) will be announced on Wednesday, August 31st. Expectations are 7.5 percent growth. The positive balance sheets in Borsa Istanbul for the first half of this year already give an opinion on the course of the Turkish economy. On the other hand, Turkey’s 5-year CDS premium continues to fluctuate. There is a very fluctuating course, such as 900, then 650 level, regression to 800 and then 700 levels. A similar outlook prevails in Turkey’s 10-year Eurobond interest rate. It is trading in the region close to 10.00 levels. It is remarkable that the upward movement in exchange rates continues despite the spring weather in the stock market. Gross reserves announced by the CBRT for the week of August 19 were 112.3 billion dollars (previously 113.7), foreign currency deposits in banks were 213.8 billion dollars (previously 217.1). The effects of macroeconomic data on the markets are quite limited for this period.


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