Turkish Stocks Hold Near Record

Turkey’s BIST 100 stock index surged to 13,800 in February, a record high, on strong support from defense intelligence and the financial sector, as investors assessed whether the macroeconomic backdrop for the year would continue to favor equities. Aselsan shares were nearly 300% higher from the previous year amid higher defense spending from NATO members due to heightened geopolitical tensions in both Europe and the Middle East. Banks also outperformed in the recent quarters on the stability of domestic inflation, despite remaining high, spurred by credit activity following the prolonged period of unorthodox monetary policy by the central bank. The predictable decline in the lira has also allowed investors to use riskier assets such as equities to protect themselves against inflation. The TCMB cut its benchmark rate by 100bps last month, less than expectations of a 150bps cut, but reiterated that its baseline scenario sees underlying inflation continue to slow this year.