Recommendation from Credit Suisse Group

Credit Suisse Group recommended investors buy Turkish equities, especially banks, on expectations for peaceful parliamentary elections in two weeks, boosting prospects for faster economic growth and lower interest rates.

Switzerland's second-largest bank said holdings of Turkish stocks should be 10 percent higher than their weightings in international benchmarks, Alexander Redman, Yavuz Uzay and Berna Bayazitoglu wrote in a strategy note dated July 3 and distributed today.

``We don't expect a big change in the political landscape after the elections,'' Uzay, a London-based analyst, said in a telephone interview today.

Credit Suisse upgraded Turkiye Is Bankasi AS, the nation's biggest bank, to ``outperform'' from ``neutral'' and raised its price estimate to 8.5 liras ($6.58) from 7.15 liras. Shares of Isbank, as the lender is known, rose 3.8 percent to 6.85 liras, the highest since April 25.

Turkey's benchmark ISE index climbed 1.6 percent to a record today after Credit Suisse recommended buying the country's shares and inflation slowed last month more than economists anticipated.

The index has added 5.5 percent since the tension between the government and the army broke out on April 27. The Morgan Stanley Capital International Emerging Markets Index, a benchmark for developing countries worldwide, has risen 12 percent in the same period.

General Elections

Turkey will hold general elections on July 22, earlier than planned after the army blocked Prime Minister Recep Tayyip Erdogan's candidate for president, Foreign Minister Abdullah Gul, claiming that he's too pro-Islamist. The secularist military has forced four governments from power since 1960.

Erdogan's governing Justice and Development Party, known as AKP for its Turkish acronym, is leading opinion polls.

Credit Suisse is confident of a ``benign outcome from the current political turmoil post the July 22 elections,'' the note said. ``We are now of the view that the path for Turkish politics, central bank easing and equities over the next 12 months is less opaque,'' the note said.

The Turkish economy has grown about 7 percent a year in the last five years while the inflation rate tumbled to 8.6 percent from more than 70 percent. The economy will probably grow at ``around'' 5 percent this year, Turkish central bank Governor Durmus Yilmaz said in an interview yesterday.

The inflation rate fell in June for the third consecutive month, backing central bank predictions of a slowdown in prices that could lead to interest-rate cuts later this year.

Cheap Stocks

Credit Suisse added Isbank to their Europe, Middle East and Africa Focus list, in place of Anglo American Plc, the world's second-biggest mining company, whose shares have reached the bank's price estimate.

Turkiye Garanti Bankasi AS's price estimate was increased to 9 liras from 8 liras by Credit Suisse, and the bank raised Akbank TAS's target to 8.4 liras from 7.8 liras.

``The heavyweight banking sector in Turkey is the cheapest in EMEA,'' the note said.

Turkish banks trade at a 29 percent discount to their peers in the region as they have underperformed, especially since the end of April as political tension increased, the note said.

Credit Suisse upgraded its 2008 loan-growth forecast for Turkey to 21 percent from 16 percent as the bank forecasts rate cuts in the rest of 2007 and in 2008.

The bank said it would ``take profits'' from its 20 percent ``overweight'' stance on shares from the Czech Republic in favor of Turkish stocks.

source;bloomberg.com