(Bloomberg) — Turkish stocks jumped to an all-time high, eclipsing the previous record from 13 months ago, as expectations for a decline in inflation bode well for more interest rate cuts.
The Borsa Istanbul 100 Index, the Turkish benchmark gauge, rose 1.6% on Thursday. The gauge has climbed 25% since May as the brightening outlook for monetary easing stokes interest from foreign investors.
The gauge’s performance has been choppy in past months due to political upheaval, which disrupted rate cuts, as well as concern over a potential hard landing for the $1.3 trillion economy. Turkey’s central bank resumed rate reductions in July, however, reviving interest in the stock market.
Investor pessimism has faded as price growth continues to decline, boding well for further interest rate cuts. Advances in the fight against persistently high inflation also signal that Turkey’s painful return to a more orthodox policy stance is bearing fruit.
“Investors are getting confident about the disinflation process and continued anticipation of further easing in interest rates,” said Can Oksun, a senior trader at Istanbul-based Global Securities.
Turkey lowered the one-week repo rate by 300 basis points to 46% last month, more than forecast by most economists. The central bank said future easing will be assessed on a “meeting-by-meeting basis with a focus on the inflation outlook.” Consumer price growth undershot analyst expectations in July, signaling that another cut may be in store in September.
The Borsa Istanbul 100 has gained 15% this year, although in dollar terms it’s still down due to the lira’s depreciation. That compares with a 17% advance in the benchmark MSCI emerging-market stocks gauge. Even with the rally, local investors purchasing the index have lost money as inflation grew more than 33% in July, from a year earlier.
(Updates with closing levels)
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