Istanbul exhibits indications of implementing measures to counteract the disappointing trend observed in the first half of 2025.
The Turkish equity market, Borsa Istanbul (BIST), is attempting a comeback in the second half of 2025, as positive macroeconomic indicators and improved political stability signal a potential market recovery.
In the first week of July, the BIST 100 index climbed 9.26%, reaching its highest closing level since March at 10,275 points and testing a 15-week high of 10,379 points. Despite year-to-date gains of 4%, the BIST 100 has contracted by over 4% year on year, and when adjusted for inflation, the real return was negative (-13.26%). However, easing inflation, political calm, and expectations of interest rate cuts have begun to fuel optimism among investors, boosting confidence in the Turkish macroeconomic environment.
The price-to-earnings (P/E) ratio for Turkey's stock market ETF (TUR) was estimated at 10.32 as of early July 2025. This is significantly above the five-year average P/E range of 4.59 to 6.39, suggesting that the market might currently be considered expensive by historical standards. The short-term price trend versus the 50-day moving average was positive (+3.73%), but the long-term trend versus the 200-day moving average was slightly negative (-4.71%), indicating mixed signals on valuation and momentum.
The prospects for Borsa Istanbul are closely tied to macroeconomic improvements including easing inflation and likely policy rate cuts by the Central Bank of Turkey. Additionally, a temporary political stabilization, such as the adjournment of a high-profile case involving the main opposition party, has helped reduce political risk, improving investor sentiment.
Significant investments are expected in Turkey’s data center market, which may positively impact technology and infrastructure-related equities. Around $200 million in new investments are forecasted for data centers by 2026, with considerable capacity expansions planned across major cities including Istanbul and Ankara, which could support growth in technology-related sectors on the BIST.
With inflation trending lower, financial conditions easing, and political headlines momentarily subdued, Turkish equities are in a stronger position to attract renewed domestic and foreign interest. The expected interest rate cut will be crucial to sustain momentum, and its success hinges on the central bank's ability to maintain credibility while navigating the delicate balance between growth and stability.
In an effort to ensure orderly market functioning and preserve investor confidence during a period of heightened sensitivity, Turkish regulators have opted to maintain a cautious approach by extending temporary protective measures, including a ban on short selling, eased conditions for share buybacks, and relaxed collateral requirements for margin trading operations.
As the July 24 CBRT meeting approaches, markets will be watching closely for confirmation that Turkey is indeed entering a new phase of economic and financial normalization. Despite recent rallies, equity markets have delivered negative real returns so far in 2025, highlighting the impact of persistent inflation and volatility. Nonetheless, the latest developments and forecasts for Borsa Istanbul in the second half of 2025 indicate a cautious optimism driven by several positive factors, and investors should remain cautious due to valuation concerns and global uncertainties, but the market is positioned for a potential rebound led by easing inflation and renewed confidence among investors.
- The Turkish equity market, Borsa Istanbul (BIST), is targeting a recovery in the second half of 2025, buoyed by positive macroeconomic indicators and improved political stability.
- Recently, the BIST 100 index showed a notable increase of 9.26%, reaching its highest closing level since March at 10,275 points, despite an annual contraction of over 4% and a negative real return of -13.26% when adjusted for inflation.
- The demand for technology and infrastructure-related equities could receive a boost from significant investments expected in Turkey’s data center market, with approximately $200 million forecasted for data centers by 2026, resulting in capacity expansions in cities like Istanbul and Ankara.
- To preserve market order and investor confidence, Turkish regulators have extended temporary protective measures, such as a ban on short selling and relaxed collateral requirements for margin trading operations.
- As Turkey enters a potential phase of economic and financial normalization, Turkish equities are poised for renewed domestic and foreign interest, yet investors should exhibit caution due to valuation concerns and global uncertainties, while remaining optimistic due to easing inflation and the market's potential rebound.
