Investors take note! Which sectors will be profitable on the stock market in 2024? Experts explain

The BIST 100 index on Borsa Istanbul has risen by 75 percent since the general elections.

The BIST 100 index, which followed a volatile course following the earthquake disasters on February 6 at the beginning of this year, rallied after the end of election uncertainties and the implementation of policies by the new economic management.

The BIST 100 index, which has gained approximately 75 percent in value since the general elections concluded in the second round, has recorded a 46 percent increase since the beginning of the year. During this period, the index hit a record high of 8,513.54 points.

WHICH SECTOR HAS BEEN THE MOST PROFITABLE?

Among sector indices, insurance has been the most profitable since the beginning of the year with a 167 percent increase, while mining has seen the largest decline at 0.87 percent. The banking index recorded a 72 percent increase, and the holding index rose by 41 percent.

On the other hand, while gram gold has risen by 75 percent since the beginning of the year, the dollar/TL exchange rate has gained 54 percent in value during the same period.

Turkey's 5-year credit default swap (CDS), which was at 700 basis points in May, continued its downward trend and closed at 332.8 basis points on Thursday, marking its lowest daily close since March 19, 2021.

Following the policies implemented by the new economic management after the elections and meetings held with foreign investors, positive assessments regarding Turkey from international credit rating agencies continue to arrive one after another.

"A HARBINGER OF UPCOMING CREDIT RATING UPGRADES"

International credit rating agency Standard & Poor's (S&P) revised the country's credit outlook last week, conducting an unscheduled assessment due to recent policy adjustments in Turkey. While S&P affirmed Turkey's credit rating as "B", it changed the credit rating outlook from "stable" to "positive".

Previously, another international credit agency, Fitch Ratings, revised Turkey's credit rating outlook from "negative" to "stable", while Moody’s had changed the rating outlook of 17 Turkish banks from "negative" to "stable".

PhillipCapital Domestic Markets Group Head Üzeyir Doğan said that the revisions in the credit rating outlooks for Turkey by international credit rating agencies are also a harbinger of upcoming credit rating upgrades.

Emphasizing that the downward trend in CDS is also an indicator of the improvement in the perspective toward Turkey, Doğan stated that although foreign inflows into both bonds and the stock market have recently begun, the expected upward movement in Borsa Istanbul has not yet materialized.

Doğan stated, "The strong financials announced by companies in the third quarter and Borsa Istanbul's retreat from its peak have brought significant declines in market multiples for both the index and many companies with high weightings in the index. This is also an indicator that significant potential has accumulated." He emphasized that although stock-based movements have been more prominent in the BIST 100 index recently, the effort to hold above the 8,000-point level creates a positive picture.

"CAN BE EVALUATED AS A BUYING OPPORTUNITY"

Stating that the Christmas period abroad followed by New Year's holidays in December could be a cause for lethargy and that a decline in volatility as well as trading volumes could be observed, Doğan said, "However, the continuation of foreign inflows, even if limited as we mentioned at the beginning, could support the upward potential in the index, albeit with low volumes. We may see more permanent movements in the index, where we think foreign investor interest will increase even more with the new year."

Doğan also made a technical assessment regarding the BIST 100 index and noted the following:

"In the short term, the 8,080-point level, where the 61.8 percent correction level is also located, acts as an important resistance for the index. Closings above this level could allow for a rapid test of the vicinity of 8,500, where the previous peak was located. On the downside, 7,750 points is the most important support level, and pullbacks to this level can be evaluated as a buying opportunity."

"60 PERCENT DISCOUNTED COMPARED TO ITS PEERS"

Perform Portfolio Fund Manager Altan Aydın also stated that the difficult year of 2023 in Borsa Istanbul did not offer a bad return despite everything, assessing, "The BIST 100 index was competing with inflation and foreign currency until October. I expect the index, which weakened after the Hamas-Israel conflicts that began on October 7, to finish the year with a good outlook again."

Expressing that the third-quarter balance sheet period was quite successful for companies but that tightening steps created pressure on profit margins, Aydın stated that he thinks the fourth-quarter balance sheet period could be relatively calmer and that sector-based positive divergences could be seen.

Noting that the price-to-earnings (P/E) ratio of the BIST 100 index is at the 6.6 level, Aydın continued as follows:

"The P/E level of the BIST 100 index was at 7.7 before the third-quarter balance sheet period. According to 2024 profit estimates, the BIST 100 index is trading at a 4.5 P/E. This indicates that the BIST 100 index is discounted by around 60 percent compared to its peers. The increase of the policy rate to the 40 percent level also creates upward pressure on loan and deposit interest rates. Viewed from this perspective, although a negative outlook might be considered for the stock market in terms of both the financing burden of companies and alternative returns, it should be noted that a promising environment has been formed given the predictable policy and the level the risk premium has reached."

Stating that as we enter 2024, a more predictable monetary policy, balanced inflation expectations, and an environment of reduced political uncertainty will appear attractive to foreign investors, Aydın said, "The demand for issuances in recent months and the frequency of reports written should be considered as examples of this situation. For this reason, I expect a performance that can offer real returns for 2024, although not as much as in the last two years. On a sectoral basis, we prefer banking, food producers, food retail, and telecommunications. If we consider 2024 and 2025 together, we believe it is necessary to keep an eye on long-term investment opportunities, especially in the aviation and energy sectors."

News Source: AA