UPDATE 1-Turkey stocks rise on IMF hopes, shrug off GDP data

(Updates prices, adds Turkish Airlines share rally)

ISTANBUL, June 30 (Reuters) - Turkish equities hit a fresh 2009 high on Tuesday as investors shrugged off a record economic contraction in the first quarter, focusing instead on signs of global economic recovery and a possible IMF deal.

By 1305 GMT Istanbul stocks traded 1.03 percent higher at 37,220 points, gaining for a fifth straight day and supported by technical buying after the index breached a resistance level of 36,000 points.

Stocks outperformed the MSCI index of emerging market stocks .MSCIEF, which traded up 0.43 percent, and have now risen almost 40 percent since the start of the year -- lagging gains in Russia, China and India but dwarfing single-digit gains made by central European indices.

Data from Turkey's Statistics Institute on Tuesday showed the economy contracted 13.8 percent year-on-year in the first quarter, officially plunging Turkey into recession.

"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.

Although describing the figure as disastrous, economists said a contraction steeper than in Turkey's 2001 financial crisis had been expected by markets.

"People are focusing on the extent of a pick-up in activity in the second quarter," said Tunc Yildirim, director of sales at Standard Unlu. But he added there were fears that the government might cut its forecast of economic performance.

The government revised its year-end GDP figure to a 3.6 percent contraction from 4 percent growth earlier this year.

The lira strengthened to 1.5280 re dollar from Monday's close of 1.534, while the benchmark Feb. 2, 2011, bond <0#TRTSYSUM=IS> yield held steady at Monday's close of 11.92 percent, its strongest level since mid-May.

AIRLINE GAINS

Driving equities higher was Turkish Airlines (THYAO.IS) which rose 9.0 percent after strong passenger figures and load factor data from rival airlines boosted expectations that the flag carrier would also post strong figures.

Turkish stocks have risen some 65 percent since a 2009 low in mid-March, mostly on improved global sentiment which has seen investors return to riskier emerging assets, and signs from Ankara that it is nearing a deal with the IMF.

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

Disagreements primarily over spending have delayed the sealing of the agreement.

(Reporting by Thomas Grove, Alexandra Hudson and Ceyda Caglayan; Editing by David Stamp)