Turkish lira papers failed to prove the bet of the year in 2024 since the Erdogan regime did not allow a nominal lira appreciation, while rate cuts arrived later than expected.

At the monetary policy committee (MPC) meeting held on March 21, just prior to the local elections that were held on March 31, Turkey’s policy rate reached a peak of 50%. It was still there by December 26.

As a result, expected rate cuts in 4Q arrived late.

Neverthless, attractive interest rates brought in $30bn in carry trade flows in addition to $10bn in government lira paper revenues from end-March.

In 2025, currency gains will again not be available, as the regime has been applying a smooth nominal devaluation and real lira appreciation policy.

However, rate cuts will offer chunky gains in lira paper prices. Currently, the yield on the 2-year domestic government paper stands at around 41%. A 10-20pp gain is certain to be seen here by the end of 2025.

Moreover, Borsa Istanbul is supposed to come back into the game. The banking stocks, as the first beneficiaries of a rate-cutting cycle, will be watched.

It should be noted that the Borsa Istanbul market is highly manipulated. Foreign investors are yet to show any interest in Turkish stocks. The risks should not be overlooked.

Akbank (AKBNK), a unit of Turkish conglomerate Sabanci Holding (SAHOL), Isbank (ISCTR) and Yapi Kredi Bank (YKBNK), a unit of Turkish conglomerate Koc Holding (KCHOL), are well-managed banks and are among the components of the BIST-30 index.

Given the market situation, however, even this top index includes many manipulated stocks. If you are not an insider privy to the circles of manipulation, trading on the BIST-30 is akin to swimming in a pool of sharks.

The Garanti (GARAN) stocks are not like the old GARAN stocks. The free-float fell to 14% of equities after BBVA (Madrid/BBVA) upped its stake to 86% in 2022.

Request the full report here