UPDATE 1-Turkish stocks close at new 2009 high on EM gains

(Adds closing prices, quote)

ISTANBUL, May 20 (Reuters) - Turkish stocks rose to a new high for this year, helped by top-traded financial Garanti, while the lira firmed to January levels on Wednesday as Istanbul markets played catch up on two days of gains in global markets.

Hopes that a world economic recovery could take place later this year have boosted global markets since Tuesday and have attracted some investors towards riskier emerging market assets, including the stocks, lira and bonds.

Markets in Turkey were closed on Tuesday for a national holiday.

Istanbul's benchmark share index closed 4.38 percent higher at 35,139.7 points, led by banking shares .XBANK which were up 6.2 percent, following sharp losses on Monday.

The Istanbul index outperformed the MSCI emerging equities index .MSCIEF, which was up 1.61 percent.

"The buying we saw in global markets yesterday, while we were closed, was reflected in the Istanbul Stock Exchange today. Positive first quarter results also increased (Turkish) risk appetite," said Ekspres Invest's Can Oksun.

Top traded Garanti Bank (GARAN.IS) closed 9.04 percent higher at 3.86 lira, while Wednesday's third-most traded stock Yapi Kredi Bank (YKBNK.IS) rose 6.09 percent to 2.44 lira.

Turkish banks, which have fared better than their European and U.S. counterparts, have recorded overall better than expected earnings in the first quarter.

Garanti beat expectations last week when it said first-quarter consolidated net profit rose 44 percent to 712 million lira ($454.37 million) as lower funding costs boosted margins.

Yapi Kredi (YKBNK.IS), owned by UniCredit and Koc Holding, (KCHOL.IS) said first-quarter consolidated net profit rose 6 percent to 471 million lira ($301 million).

The lira IYIX= was trading more than 2 percent firmer at 1.5230 against the dollar, at levels not seen since early January. The currency closed at 1.555 close on Monday.

"The Turkish lira is now playing catch-up with increased appetite for riskier emerging market assets across the board," said a foreign exchange trader.

The benchmark Feb. 2, 2011, bond <0#TRTSYSUM=IS> yield fell to 12.02 percent from 12.16 percent on Monday.

Markets ignored new doubt cast on Turkey's protracted talks with the International Monetary Fund about a possible loan deal which were suspended in January, but which they had hoped would resume.

Central Bank Governor Durmus Yilmaz said Turkey should have a back-up plan if the talks were not successful, the state-run Anatolian news agency reported.