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Buffett Indicator: Turkey Stock Market Valuations and Expected Future Returns

Updated at Sun, 20 Jun 2021 20:30:06 -0500
Country: Turkey (updated daily) check out Global Overview for detailed methodology.

According to the original Buffet Indicator, the Stock Market is Fair valued.

Ratio of total market cap over GDP: Recent 10 Year Maximum - 38.19%; Recent 10 Year Minimum - 19.63%; current - 29.31%
Expected future annual return: 12.6%

Based on the newly introduced total market cap over GDP plus Total Assets of Central Bank ratio, the Stock Market is Fair valued.

Ratio of total market cap over GDP plus Total Assets of Central Bank: Recent 10 Year Maximum - 32.92%; Recent 10 Year Minimum - 16.26%; current - 22.58%
Modified expected future annual return: 13.6%

ETF Used for dividend yield: TUR (Yield=3.58%)
Market Index used: BIST 100
Current Annual GDP: $512 billion US dollars or 4,490 in billions of national currency (GDP in Local Current Prices Annual Growth=9.75%)
Current Total Asset of Central Bank: $153 billion US dollars or 1,339 in billions of national currency
Data since year 1992


Turkey Historical GDP Growth

Historical GDP of Turkey in billions of national currency. The GDP in local current prices has grown at the annual rate of 9.75% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $512 billion US dollars or 4,490 in billions of national currency.

Turkey GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Turkey in billions of national currency. This value is normalized using the data published by WorldBank. BIST 100 is used for the normalization. Use BIST 100 as index, data goes back to 1993. Annual GDP data from IMF, back to 1980, in billions Turkish Lira.

Turkey Total Market Cap (Billion, National Currency)

Historical Total Assets of Central Bank

Historical Total Assets of Central Bank of Turkey in billions of national currency, which is obtained from each country’s central bank balance sheet. Please be aware that if the total assets is displayed as zero or - , it suggests that there's no data available rather than the original data being zero. In this case, the modified version of both the ratio and projected annualized market return will be treated the same as the original version.

Turkey Total Assets of Central Bank (Billion, National Currency)

Original and Modified Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Turkey is 29.31%. The recent 10 year high was 38.19%; the recent 10 low was 19.63%. If we assume that the ratio will reverse to the recent 10 years mean of 27.73% over the next 8 years, the contribution to expected annual return is -0.69%.

Based on the modified version, the current TMC / (GDP + Total Assets of Central Bank) Ratio for Turkey is 22.58%. The recent 10 year high was 32.92%; the recent 10 low was 16.26%. If we assume that the ratio will reverse to the recent 10 years mean of 23% over the next 8 years, the contribution to expected annual return is 0.23%.

This is the detailed historical chart of the original TMC / GDP ratio and modified TMC / (GDP + Total Assets of Central Bank) ratio.

Turkey Original and Modified Ratio of TMC over GDP (%)

Based on these historical valuations, we have divided market valuation into five zones:

Ratio = Total Market Cap / GDP Valuation
Ratio ≤ 19% Significantly Undervalued
19% < Ratio ≤ 25% Modestly Undervalued
25% < Ratio ≤ 31% Fair Valued
31% < Ratio ≤ 36% Modestly Overvalued
Ratio > 36% Significantly Overvalued
Where are we today (2021-06-21)? Ratio = 29.31%, Fair valued

Based on these modified historical valuations, we have divided market valuation into five zones:

Ratio = Total Market Cap / (GDP + Total Assets of Central Bank) Valuation
Ratio ≤ 16% Significantly Undervalued
16% < Ratio ≤ 21% Modestly Undervalued
21% < Ratio ≤ 25% Fair Valued
25% < Ratio ≤ 30% Modestly Overvalued
Ratio > 30% Significantly Overvalued
Where are we today (2021-06-21)? Ratio = 22.58%, Fair valued

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Turkey stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below.

The Predicted Return line indicates the expected, or predicted annualized return for the next eight years if the current TMC / GDP ratio reverts to its recent 10 years mean of 27.73%.

The Modified Predicted Return line indicates the expected, or predicted annualized return for the next eight years if the current TMC / (GDP + Total Assets of Central Bank) ratio reverts to its recent 10 years mean of 23%.

The Actual Return line indicates the actual, annualized return of the Turkey stock market over eight years. We use “BIST 100” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the actual return line is closely parallel to the two predicted return lines.

Predicted and Actual Returns of Turkey

Conclusion

Under the original buffett indicator, the stock market of Turkey is expected to return 12.6% a year for the coming years. This is from the contribution of economic growth in local current prices: 9.75%, Dividend Yield: 3.58% and valuation reverse to the mean -0.69%.

Under the modified model, the contribution of economic growth and dividend yield stays the same while the valuation reverse to mean changes to 0.23%. Consequently, the stock market of Turkey is expected to return 13.6% a year.

This is the projected return and the modified projected return of the stock market in Turkey relative to other countries. Click on the country on the left sidebar to check out the details for each country.





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