The puzzle of which maturity and which level in investment

In the short term, market pricing continues to be shaped around geopolitical risks. With declining stock prices, the BIST-100 current P/E ratio has pulled back to the 7.1 level. Borsa İstanbul is still trading at a 57 percent discount compared to emerging market exchanges. Pullbacks in the index offer new opportunities to reposition and accumulate high-competitiveness stocks at a low cost.

In alternative investment vehicles, funds based on foreign currency and gold are coming to the fore rather than the assets themselves, while 10-year US Treasury bonds, which have seen their peak, are also revealing new opportunities in foreign markets. Perhaps the most critical question regarding buying and selling for all these opportunities is: Which maturity, which level? Ekonomim, which obtained estimates for short, medium, and long-term buy-sell levels for the stock market and other investment vehicles from a group of experts, asked them to explain why each level is important.  

NEW OPPORTUNITIES ARE EMERGING IN THE STOCK MARKET

ALB Investment Research Manager Uğur Aydın:

Geopolitical risks blew harsh winds through the markets in October. Following its all-time high of 8,562 on October 3, the BIST-100 index moved about 13 percent away from its peak due to increasing geopolitical risks and panic selling triggered by the closing of leveraged positions.

Although the increase in geopolitical risks appeared to be a justification for the sell-off, it was more like an excuse for profit-taking sought after a rally that started at 4,400 and reached 95 percent. The fact that stocks were approaching their 12-month targets and their potential returns were becoming limited was one of the rational reasons for selling.

While potential returns on stocks were becoming limited, the fact that deposit interest rates for up to 3 months reached 45 percent annually and approached the 12-month CPI increase expectation was effective in bringing risk-free assets to the fore. On the other hand, foreign purchases seen in Borsa İstanbul in June and July gave way to sales as of August, which played an important role in the index losing some strength.

In the coming period, the normalization of the country risk premium, the exit from the KKM (FX-protected deposit) scheme, the establishment of the disinflation process, the increase in foreign exchange reserves, and the recovery of global risk appetite could bring foreign purchases back to the stock market. However, it seems more likely that this will be spread over time and occur from a medium-to-long-term perspective. On the other hand, as of the current earnings season, in addition to the increase in companies' operational performance and profitability ratios, the BIST-100 current P/E ratio has declined to 7.1 along with falling stock prices. The fact that Borsa İstanbul continues to be discounted on a multiple basis compared to its historical average and other emerging market stock exchanges may mean that pullbacks in the index create an opportunity to reposition or make additions. In this context, the 6,500 level, where the 200-day moving average is also approaching, can be followed as an important lower limit in declines caused by geopolitical concerns. Within the framework of current macro projections and financial valuations, our maximum index expectation for this year according to 12-month target prices is 9,200... However, we believe that with the increasing company profits in the earnings season and 2024 target price revisions, average index targets for the BIST-100 could rise toward the 11,000-12,000 band, and if conditions are favorable, the long-term 12,000 level could become an important target.

INTEREST RATES, A SHORT-TERM ALTERNATIVE

Among alternative investment vehicles, interest rate instruments and gold have recently come to the fore. It is seen as the highest probability under current conditions that inflation will remain high at least throughout the first half of 2024 and begin to decline after June. This situation may lead to deposit interest rates remaining high throughout the first half of 2024. In this context, deposits could be a short-term alternative.

GOLD SHOULD ALWAYS BE IN PORTFOLIOS

On the other hand, gold, where global uncertainties and unexpected geopolitical developments trigger safe-haven buying, will always be an asset that should be included in portfolios. I believe that as of the third quarter of next year, in addition to the scenario of major central banks starting to cut interest rates, unexpected geopolitical risk factors could bring the possibility of gold's ounce price positioning above $2,000 to the agenda in the coming period. The potential for an increase in the ounce price, combined with the impact of potential rises in the dollar/TL exchange rate, could bring new historical highs to the agenda for gram gold. Consequently, any easing in gold prices can be evaluated as an opportunity for the medium-to-long term.

Stock market still at a 57% discount

Ata Invest Research Deputy General Manager Cemal Demirtaş:

The new economic management's shift toward rational policies and their statements regarding ensuring transparency have refreshed investor confidence. Subsequently, relatively more constructive policies followed, especially in geopolitical matters and international relations, which supported the wind behind the index. The BIST-100 Index, which was at the 4,580 level on May 26, reached the 8,513 level as of October 3, an increase of 86 percent.

The stock market, which spent October trying to digest current levels, is gathering strength for a new upward movement. As we stated in our strategy report published on October 18, we estimate that the BIST-100 index could reach the 11,000 level with a 38 percent upside potential over the next 12 months.

With selective stock picking, returns of up to 75-80 percent can be achieved with a potential rise in the BIST-100 in the 38-45 percent range. In the short term, levels of 8,000-9,000 can be targeted for the BIST-100 Index, while 11,000-12,000 levels can be targeted over a 1-year horizon.

Considering that the Turkish stock market is trading at a 57 percent discount compared to emerging market exchanges, the BIST-100 index has high upside potential in the long term as the country's risk premium decreases. The course of direct investment and portfolio investment inflows over the next 3-5 months will be decisive in determining the market's direction.

Among alternative investment vehicles, TL-interest, foreign currency-interest, Turkish Eurobonds, foreign stock investments, and gold stand out. We find it reasonable to hold 40 percent of portfolios in stocks. In particular, a difference can be made through selective stock purchases.

Although interest rates appear somewhat more attractive compared to the past, they may remain below our 38 percent average stock market return expectation. Nevertheless, they may be a preferred option for risk-sensitive investors. Similarly, we estimate that foreign currency and gold returns may also remain below the stock market. Therefore, we favor stocks for our long-term preferences. However, taking into account possible fluctuations in the economy, we believe that having some interest and foreign currency in portfolios plays a balancing role.

OPPORTUNITY TO ACCUMULATE HIGHLY COMPETITIVE STOCKS AT A LOW COST

Ahlatcı Yatırım Treasury Manager Arda Coşar:

The index, which approached the 8,600 level, has declined for two weeks due to the Israel-Hamas war unfolding in the Middle East, the possibility of it spreading, and the news flow regarding a potential ground operation. Although it gained momentum once again with new news flow suggesting that the ground operation was postponed, it pulled back to the 7,500 level again due to harsh criticisms rising from domestic politics. All scenarios regarding the war are still on the table and largely remain valid.

On the other hand, the rapid rise seen in US bond yields also keeps major stock markets, especially the US, under its influence, and the probability of this pressure continuing is quite high.  

Therefore, a trend where volatility increases depending on the news flow to the markets may prevail. If the index slips below 7,500, it may retreat first to the 7,000s under new selling pressure, and if it breaks this level downward, it could fall to the 6,500-7,000 band. If this movement occurs, it is possible to say that these would be quite suitable levels to accumulate highly competitive stocks at a low cost.

On the other hand, with positive news flow that reduces the impact of war scenarios, we could optimistically see the index around 9,000. 

Currently, a stock asset ratio of around 50 percent can be maintained in portfolios. It is beneficial to allocate about 20 percent of stock assets to large and private banks. This ratio can be increased in case of breaks below 7,000 in the index. The remaining savings can be balanced by investing in gold and foreign currency. Another alternative can be sought in the peaking US 10-year bond yields or funds based on them.

SELLING PRESSURE MAY SPREAD OVER A LONGER TERM

Founder of Tuncay Turşucu Research and Consultancy Inc.:

Markets have been volatile in recent days. By testing the 8,500 level in early October, the index formed a strong resistance at this level. However, this level could not be surpassed. Let us note that the 8,500 level has become a critical resistance for the index. On the other hand, at the same levels, the index had moved too far from its averages, and a need for a pullback had emerged. Indeed, this pullback is currently taking place. The major support to watch below will be the 7,100-7,200 zone, which is the 22-week average. Buyers may emerge at this level. However, for these buyers to strengthen and for a more permanent upward movement to occur, staying above the 8,000 level will be required. As long as it remains below the 8,000 level, the BIST-100 index will remain under pressure. Conversely, if the BIST-100 index falls below the 7,100 level, selling pressure may spread over a longer term, and there may be a risk of a decline toward the 50-week average at the 6,000 level.

In alternative areas, for instance in ounce gold, the 1,990 resistance can be monitored. If this point is exceeded, a movement toward the 2,080 resistance may occur. The 2,080 resistance is a critical level. If this level is passed, we may see higher levels. Below, there are supports at 1,950 and 1,880. A stronger, more medium-term support was at the 1,800 level.

In Brent oil, the 84-85 dollar levels could be quite strengthened supports. The near level of 91 dollars is a zone where the 22-month average is located, and it is struggling to pass this level. If the 91 dollar level is passed, 96 dollars will be an important resistance. If trends occur below the 84 dollar support in oil, a medium-term easing process may occur. Conversely, if 96 dollars is passed, a medium-term upward process may occur.

8,560 IS A CRITICAL RESISTANCE POINT 

A1 Capital Deputy General Manager Baki Atılal:

The level where the BIST-100 index completed its long-term flag and Fibonacci targets is around 8,500. Therefore, it is technically very normal for it to enter a correction at these levels. The news flow has also served as a pretext for the correction. Understanding this is important to grasp the trend the index is likely to form in the medium term.

When we look at the monthly chart of the BIST-100, we see that it has entered a 5-month correction process before. Looking at the bars formed previously and this month, the question of whether the index might move within a horizontal band lasting at least 2-3 months may come to the agenda, and it is within the realm of possibility. Therefore, the October close will be important.

It was expected that the Fibonacci correction and strong horizontal support levels of 7,560 and 7,450 would hold, but these supports were broken with recent developments. And below the 7,450 level, 6,800 became the main support and target. Therefore, we will monitor the 6,800-7,450 levels for gradual purchases, the 7,850-8,560 and 10,120 levels for sales, and the 8,560 level, which we follow as the historical peak, as a critical resistance point during sustained rallies above 7,400 for the short, medium, and long term.

If sufficient rest and power accumulation time is provided within the horizontal band range, technical formations extending up to the 11,000 levels in the index may emerge after the first short-term target of 9,600 above 8,560.

In terms of geopolitical risks, gold is perceived as the safest haven. With geopolitical risk, we can expect the uptrend that started from the short-term support of 1,810 to approach its targets of 2,000 and 2,071. With the reduction of geopolitical risks, high inflation in global markets and the level of bond yields will cause selling pressure on gold to increase again. Since the Fed and the ECB have already stated that it is too early to talk about interest rate cuts, the 1,810 level remains the short-term support, while the 1,670 and 1,611 levels remain the main supports for the medium and long term.

Looking at resistance, while the short-term resistances are in the 2,000-2,071 band, our medium and long-term targets are the 2,250 and 2,500 levels.

Brent oil, on the other hand, appears to be feeding on geopolitical risks once again. Already affected by supply constraints and changes in US inventories, Brent oil has a support level of 82.50 below the 88.70 support in the short term, while the 70 dollar level below the 50-day moving average of 82.50 stands out as medium and long-term support. Looking at resistance levels, 93.90 is the short-term resistance, 103.40 is the medium-term resistance, and 110.40 is the long-term resistance.

EUROBONDS MAY BE PREFERRED OVER FOREIGN CURRENCY

Ali Barbaros Demirer, Department Manager of Deniz Yatırım Investment Advisory:

The index, which has seen increased volatility due to the geopolitical risk theme, makes it difficult for investors to make decisions amid short-term uncertainties.

For short-term positions, 7,150 and 7,400 are the two critical support levels we are monitoring in the index. Reactionary buying can be expected from these levels. However, we do not believe the short-term selling pressure will end without sustaining a position above the 8,000 level. We can say that the 3rd quarter financial results announced so far have been quite strong and above expectations. For this reason, we maintain the view that pullbacks in the index still create opportunities for medium and long-term investors. Therefore, we are monitoring the 7,100-7,400 band for buying opportunities in the medium and long term.

However, despite all the opportunities, we must emphasize that the risk weight in portfolios should be balanced with short-term deposits. We believe the outlook for foreign currency still points to a return below inflation. We should note that investors with foreign currency assets can increase their returns somewhat more through Eurobonds.

Gold, meanwhile, is increasing its appeal due to the impact of rising geopolitical risks. However, investors should be cautious about the possibility of a sharp decline in the event of a potential change in risk perception.

THE UPWARD MOVEMENT OF OUNCE GOLD MAY ACCELERATE

İnfo Yatırım Research Strategist Çağlar Toros:

The index, which spent the previous two weeks with a loss of approximately 11 percent, started the week with a high risk appetite and climbed back above the 8,000 level. The news flow regarding the potential postponement of a ground operation in the Middle East and rising expectations due to strong third-quarter earnings reports created an accelerating effect.   

In the short term, we will monitor the 7,925 level as a pivot, the 8,080-8,170-8,330 levels as resistance, and the 7,830-7,675-7,585 levels as support in TL terms. With the ongoing inflation theme, the returns on risk-free instruments remain in negative real interest territory. Since the stock market maintains its return potential, the index could enter the end of the year around 375-400 dollars.      

On the other hand, in this period when shifts to safe havens are accelerating, possible dovish statements from the US regarding monetary policy could turn the direction of ounce gold upward more rapidly. 

While the Middle East tension also causes partial depreciation in the TL, the rise in ounce gold and the exchange rate has also triggered an upward trend in gram gold. In the short term, the 1,976-1,983 levels should be monitored as resistance for ounce gold, and the 1,962 level as the main support. For gram gold, the 1,780-1,800 levels appear as resistance, and the 1,774-1,769 levels as support.

BUYING LEVEL FOR GRAM GOLD

InvestAZ Research and Strategy Unit Manager Mehmet Bilal Bircan:  

The increasing risk perception is creating selling pressure in both local and global stock markets. Therefore, we expect stock market pricing to continue to be shaped around geopolitical risks in the short term. Accordingly, while the 7,700 and 7,500 levels stand out as support for the BIST-100 index in the short term, the 8,200, 8,350, and 8,500 levels can be monitored as resistance for closes above 8,000.

On the other hand, the continuation of tightening practices in monetary policies supports the index in the medium and long term. Although the transition to a real positive interest rate environment is a pressure factor for the stock market in the medium and long term, the upward trend can be maintained as macroeconomic rebalancing occurs and TL assets become attractive again for foreign investors. In such a scenario, we can say that year-end levels of 9,500 for the BIST-100 index, and the 11,500-12,000 band by the end of 2024, are within the realm of possibility.

Gold, which is at the forefront of safe-haven assets, emerges as a short-term alternative investment vehicle. For gram gold, 1,750 TL can be monitored as a short-term support level. Depending on risk perception, we may see gram gold pricing approaching 1,850 TL levels. In the medium and long term, assuming the effect of a strengthening dollar and the disappearance of geopolitical risks, downward pressure on ounce gold may be expected to continue. In such a case, prices below the 1,650 level can be evaluated as a buying opportunity for gram gold. On the upside, the 2,100 level emerges as resistance for the medium and long term.

FOREIGN CURRENCY AND GOLD-BASED INVESTMENT FUNDS MAY BE PREFERRED

Dinamik Yatırım Menkul Değerler Research Specialist Ceyhun Yavaş:

Although new peaks were tested in the index, the intensity of leveraged positions, the fact that the increasing number of investors largely consists of individuals with savings under 100,000 TL, and the weakening of liquidity due to rising stock prices, combined with negative news flow, caused sharp corrections.  

In the medium and long term, 7,400 and 7,200 levels, and in the short term, 7,500-7,700 levels come to the fore. During

rallies, the 7,900-8,000 and 8,100 levels can be monitored.

When we look at the situation in alternative investment vehicles, we are following a near-flat, moderate trend in the dollar, and upward pricing in gold stemming from geopolitical risks. Rather than both investment vehicles, investment funds based on them can be preferred. In addition, Eurobonds can be preferred for medium-term investments. We are of the opinion that yields in bonds and private sector debt instruments are not yet at sufficient levels.

MAY KEEP THE EFFECTS OF LOCAL ELECTIONS LIMITED

Yatırım Finansman Strategy and Investment Consulting:

As global risk appetite declines due to rising interest rates and geopolitical risks, major stock markets have also entered a correction process. In the short term, we observed profit-taking in the domestic BIST-100 index from the 8,500 region. According to weekly data, foreigners also appear to have participated in these sales. Now, all eyes are on the third-quarter financials. The results will provide one of the clearest signals regarding the direction of the index.

While we set our year-end target for the index between 9,000 and 9,500, we view the 7,600-8,000 range as a buying zone. Despite concerns that geopolitical risks and the approaching local elections might slightly dampen foreign interest in the medium term, steps toward phasing out the KKM (FX-protected deposit scheme) and the inflationary trend may contribute to the stock market maintaining its appeal.

In such a scenario, we could talk about levels of 9,500-10,500. In the long term, we maintain our scenario that we will be able to follow the positive effects on the markets as uncertainties decrease slightly, and in addition to the disinflation process, global central banks, led by the Fed, begin to cut interest rates.

While alternative investment vehicles are instruments that can be preferred for hedging purposes compared to market risk, buy and sell levels can be adjusted at this point by taking the inflation-return balance as a basis. When we look at gold, we have observed that the rising geopolitical risks in recent days have supported demand for the yellow metal, which acts as a safe-haven asset. Spot gold showed a 10.3 percent increase in a short time with reaction buying from the 1,810 level, testing the 1,997 level. In particular, the recently high US bond yields, expectations for at least one more rate hike by the Fed until 2024, and the continued strong outlook in the dollar index emerge as the main factors limiting the rise in spot gold. Pullbacks that may occur if geopolitical risks subside can be evaluated as buying opportunities on this front. On the other hand, the expectation that global central banks will end their tightening cycles in the second half of 2024 is the prevailing view. In such a case, we believe that possible rises in gold could be evaluated as selling opportunities.

News Source: 12punto