Investment brake from JP Morgan for Turkey! Recommendation downgraded to "neutral"

While the downward trend in Borsa Istanbul indices continues, negative news for Turkish markets has arrived from JP Morgan, one of the largest banks in the US. In its latest strategy note, the bank downgraded its investment recommendation for Turkey from "overweight" to "neutral".

The note included assessments of the Turkish economy under the heading "inflation is high, interest rate cuts are distant." Analysts stated that the investment recommendation was lowered due to upward revisions in inflation expectations and the fact that a loosening of the policy rate does not appear possible in the short term.

In JP Morgan's strategy report covering the Central and Eastern Europe, Middle East, and Africa (CEEMEA) region, it was emphasized that while the foreign investor ratio in Borsa Istanbul is low and stock valuations are attractive, the rapid depreciation of the Turkish Lira was highlighted as the biggest short-term risk.

Furthermore, the note warned that Turkey's medium-tech production structure could come under pressure as Chinese exports shift toward European, Middle Eastern, and North African markets. It was stated that tariffs imposed by the US against China could exacerbate this effect.

The assessment noted that Turkey might be overlooked by emerging market investors due to its low stock market weighting and uncertain earnings structure, emphasizing that for the country to demonstrate long-term investment potential, inflation and the policy rate must fall below 10%.

With this change, the Turkish retail giant BİM was removed from the "top 10 stocks" list created for the CEEMEA region. In the updated version of the list, OTP and other Eastern European stocks came to the fore.

JP Morgan maintained an "overweight" recommendation for the United Arab Emirates, Poland, and Greece on a country basis, while moving Turkey and South Africa into the "neutral" category.

News Source: 12punto