x Abu Dhabi, UAESaturday 22 July 2017

Risk appetite cause for Turkish delight

The appetite for risk is returning in global equities and one of the first beneficiaries appears to be Turkey.

The appetite for risk is returning in global equities and one of the first beneficiaries appears to be Turkey. Turkish stocks are on their longest winning streak in 10 months. The main ISE National 100 Index of the Istanbul Stock Exchange rose as much as 0.9 per cent to 56,944.43 in trade yesterday, after Fitch Ratings said it was prepared to raise Turkey to "investment" grade in the long run.

Turkey's rating will be on an "upward trend" if the government continues to implement prudent fiscal and economic policies, Ayse Botan Berker, the head of Fitch Turkey, told Bloomberg. Altug Dag, a trader EFG Istanbul, said: "The market is reacting positively to everything regarding a ratings increase these days. Fitch's comments were also taken positively in this respect." In advance of second-quarter earnings, analysts said funds were more focused on fundamentals and less concerned about the woes in Europe and negative influences from China.

Macroeconomic news is generally positive and funds are ready to invest in markets with good fundamentals. "In the case of Turkey, Fitch's rating could certainly work as an added tailwind," said Ali Khan, the managing director and head of equities at Arqaam Capital in Dubai. Mr Khan said markets had been very cautious on investments last month but more recently there was a growing appetite for risk globally in developed markets. The trickle-down effect from that is being felt in emerging markets.

Egypt is another example. Mr Khan sees several stocks there that could outperform the index in the short term ahead of earning announcements. The Cairo Stock Exchange closed 1.01 per cent up at 6,348.25. It is up 2.25 per cent this year after some steep losses last month. Most regional markets also edged higher, supported by a Wall Street-led global markets rally and firmer oil prices. Crude prices, which have fluctuated to add extra pressure on global equities, are now hovering around $77 a barrel.

@Email:skhan@thenational.ae