Turkey rises on IMF hopes, shrugs off recession

ISTANBUL, June 30 (Reuters) - Turkish equities on Tuesday broke the previous day's 2009 record close as investors shrugged off a record economic contraction in the first quarter, focusing on improved global sentiment and a possible IMF deal.

Istanbul stocks were trading 1.16 percent higher at 37,270 at 0741 GMT, .XU100 after Turkey's Statistics Institute showed the economy contracted by 13.8 percent in the first quarter, officially plunging Turkey into recession.

The economy shrank by 6.2 percent in the fourth quarter of last year.

"Despite the GDP figures we are still rising on improved global sentiment and the market looking at the possibility of a final (International Monetary Fund) deal," said Mehmet Ilgen, a trader at Ata Invest.

The lira was marginally weaker after the data was reported, trading at 1.534 against the dollar. The currency was trading at 1.531 before the data was released and closed at 1.534 on Monday.

"The GDP data is slightly outdated at the moment, the market was expecting such a figure. It doesn't make a big difference right now," said Tunc Yildirim, corporate sales director at Dundas Unlu.

"People are focusing on the extent of an pick-up in activity in the second quarter. The real issue is that there was an expectation the government might revise its expectations for the economy," he said.

The government revised its year-end GDP figure to a 3.6 percent contraction from 4 percent growth earlier this year. Press reports have already cited the possibility of another revision.

Turkish stocks have risen some 65 percent since a 2009 low in mid-March, mostly on improved global sentiment as markets saw a turnaround to the effects of the current economic crisis, while Ankara has given signs that it is nearing a deal with the IMF.

Prime Minister Tayyip Erdogan said last week that IMF and Ankara officials would meet in the coming weeks to come to a final decision on a loan deal seen worth as much as $45 billion to help Ankara weather the economic crisis.

Disagreements primarily over spending have delayed the sealing of the agreement, keeping markets on tenterhooks as investors await to see how Turkey will deal with its foreign financing needs.

The benchmark Feb. 2, 2011, bond <0#TRTSYSUM=IS> yield was steady at the Monday close of 11.92 percent, its strongest level since mid-May. (Reporting by Thomas Grove; Editing by Ruth Pitchford)