Holiday Market Mover: Turkish Stocks
Emerging European financial markets were generally quiet over the holiday period, as was to be expected, though Turkish stocks chose to buck the trend in style. The benchmark ISE-100 equity index surged to a 12-month high on the final trading day of the year (December 31), ending 2009 at 52,825. The resulting strong monthly close, as seen on the chart below, is a markedly bullish technical signal. Not only does it reinforce the strong uptrend in play since March 2009, but also throws off a potential head and shoulders reversal pattern for the time being. Indeed, my colleagues at Business Monitor’s CEE desk had grown increasingly concerned that a right shoulder was forming on the ISE-100 after weak trading in October and November suggested that the index was bouncing off of key resistance around the 48,000 area. The strong uptick in the final week of the year though, now suggests that the market could rise back to its former record high just above 58,000 (Click chart below to enlarge).
The surge higher in Turkish stocks correlates with fresh announcements from the government that it was close to finalising a new IMF Stand-By Arrangement (SBA). Investors are banking on a new SBA to help anchor government fiscal and economic policy through the long term. To be sure, rumours regarding the SBA have been coming and going for several quarters now. However, Prime Minster Tayyip Erdogan himself has come out to say that the IMF has agreed to government conditions in what is the most concrete positive signal the public has yet received regarding a new SBA.