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bne Turkey Daily ListExecutive Summary:
This is bne's Turkey daily newsletter, a list of the top stories in the country this morning. To manage your delivery options: click here: | ||
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| 1. Inflation to fall sharply in Turkey, says governor |
| bne |
| May 3, 2012 Turkey's Central Bank expects the inflation to drop sharply in the upcoming months. In April the inflation will peak before falling rapidly, Central Bank Gov. Erdem Basci said in a presentation to the Cabinet yesterday, according to the Anatolian News Agency. The law in Turkey states that twice a year the governor has to give a briefing about monetary policy that has been implemented or will be implemented regarding banking activities. "The inflation rate is expected to reach its peak in April, however we are expecting an important drop in May. Rates will keep falling faster toward the end of the year," he said at the first mandatory briefing for this year. Basci also said that the current account deficit has gone through its worst phase after reaching its highest in October 2011 and the narrowing of the current account gap will continue in Turkey. The central bank is also optimistic for Turkey's growth in 2012. It is better to change the posture of monetary policy rather than revise the inflation rate predictions, according to Basci. Turkey's monetary policy decisions are aimed to help the inflation rate reach the "5% target" by mid 2013, he added. |
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| 2. Loan growth momentum continued to recover in Turkey; action might be required |
| BGC Partners |
| May 3, 2012 The BRSA released its weekly loan data for the third week of April. According to the most recent data, y-o-y loan growth accelerated very slightly from 23.5% to 23.7% as of April 20, while the FX adjusted y-o-y loan growth picked up from 19.0% to 19.2%, which is still one of the lowest readings since May 2010. When we look at the y-o-y consumer loan growth, which are mostly in local currency, we see a further slowdown from 21.3% to 20.4%. On the other hand, the CBT's most recent proxy, which is the 13-week rolling loan growth (FX adjusted and loans to financial sector excluded), continued to recover from 16.8% to 17.8%, which is the highest level since August 2011 (see the graph below). The CBT stated that if this ratio remains around 10-15%, the Bank would feel comfortable. Consequently, if the current acceleration of loan growth remains in the coming weeks, we think that the CBT will be forced to take a monetary policy action. Tighter TL liquidity and higher (and longer than expected) effective funding rate of the CBT could be on the agenda. |
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| 3. Turkish economy minister criticizes S&P cut |
| bne |
| May 3, 2012 bne reported earlier this week that rating agency Standard & Poor's downgraded the outlook on Turkey's long-term foreign and local currency sovereign credit ratings to 'Stable' from 'Positive' on May 1. The reaction from the Turkey's government was somewhat expected. On May 2, Turkey's economy minister slammed the downgrade asking the rating agency to double-check its data. "I advise S&P to check up its own standards because I think they are misplaced. Often, such institutions fail to make sincere judgements in their assessments on Turkey," Zafer Caglayan told reporters. "This is the very same agency that issued investment-level rating for Iceland and Ireland just a year before their economies went down tumbling in the global meltdown. These countries are now in intensive care unit," Caglayan said. The Turkish minister rejected S&P evaluation that Turkey could face problems in foreign trade. According to the minister, Turkey's exports had hit an all-time monthly high in March increasing by 12.2% compared to the same month a year earlier. |
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| 4. Turkey more experienced among emerging markets |
| bne |
| May 3, 2012 Turkey is different than other emerging markets not just historically but also economically. When most other EM countries are new to the world stage Turkey is not, says Seeking Alpha, an American stock market analysis website founded in 2004, in a research note released on Wednesday. Unlike most emerging markets, Turkey has a long and powerful history. It dominated the world stage for six centuries until the beginning of 1900s when the Ottoman Empire fell apart. After the First World War, Turkey was divided up and was left with only the Anatolian Peninsula. In 1923 Turkey cut all ties to the Ottoman Empire as Kemal Ataturk founded the Republic of Turkey. In 1952 Turkey joined NATO. "This was the turnaround point for Turkey. They were seen as a bastion for the free world in an area of vastly expanding Soviet powers. In those days (and today) the US was willing to throw free money at any country who would carry out their beliefs in different areas of the world," writes Alex Doll, a contributor to Seeking Alpha. Turkey is also different economically. Most emerging markets are heavily reliant on commodities and energy for their growth, Turkey not so much. In Seeking Alpha's research note 'Turkey - A Different Type Of Emerging Market' the website compares Turkey to Peru, another country in the emerging markets, "as they both have had similar rates of growth over the last few years". Peru's holdings are quite typical for most emerging markets, with the materials sector dominating the markets. In Turkey, however, the financials and consumer companies are more dominating and materials take only a 9% piece of the pie. One might ask why does this matter? According to the report, most of the material companies in EM region are heavily dependent on raw material sales to China. Due to this, the countries took off alongside China over the last decade. The growth is not very sustainable and currently there is an imminent slowing of China's economy on the horizon. If China's economy slows down it could cause a major demand cutback in countries that rely on China's consistent growth in order to grow themselves. Turkey, on the other hand, is not depended on raw materials demand from China. In the last five years Turkey's GDP has grown at around 8% (8.3% last year) without having been relied on China's growth. "That is why Turkey is poised to flourish in a world where very few growth opportunities remain. Turkey's growth is more correlated with sustained consumption. As shown above most of their holdings are banks and telecommunication companies. This (to me) is a sign that they should not be lumped in with other emerging markets," Doll writes. |
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| 5. EMEA ferrous and carbon 2Q12 are realistic choices for tough times |
| Renaissance Capital |
| May 3, 2012 - Another slow quarter looms. EMEA steel majors' 1Q12 numbers could be weak, given the low price levels of December 2011-January 2012 and worked-out expensive raw material inventories. Higher steel-price expectations for many of the world's markets in 2Q12 seem unlikely to be realised. Russian and Turkish HRC prices have stabilised at $610-620/t and $680-700/t ex-works, as mills failed to secure more substantial increases. CIS billet and slab prices appear firm at above $600-610/t FOB Black Sea and $570-580/t FOB Black Sea. The latest data suggest little demand growth over 2012. The Steel Index reports that 90-95% of companies in North America and Europe expect stable or lower prices in the next three months. Meanwhile, iron ore, scrap and hard coking coal (HCC) prices have stabilised after an upward correction to $148/t 62% Fe, CFR China, $448/t CFR Turkey, and $215/t FOB Australia last month. Steel mills also face rising non-raw-material costs, including those of energy and labour. In summary, steel margins remain squeezed. We have cut our FY12 EBITDA estimates for the Russian steel majors by 10-20%. - Our top-six sector themes: 1) Long steel continues to outperform flat steel; 2) mining divisions are generating solid cash flows; 3) China: set for a hard or soft landing? Exposure to Southeast Asian markets secures stable export sales; 4) is the US steel sector decoupling from Europe?; 5) balance-sheet strength remains critical; 6) the threat of state regulation in the Russian ferrous and carbon sector. - Evraz, Severstal our top picks. We focus on earnings visibility, favourable geographic and product exposure, and strong balance sheets. We favour Evraz and Severstal (rated BUY). Evraz is exposed to long steel and Asian markets: Severstal's balance-sheet strength and mining operations secure an attractive valuation, on the back of a 17% share cancellation in 3Q12. We reiterate our HOLD ratings on NLMK and Mechel. MMK (SELL) faces a rising debt burden and a lack of vertical integration. We rate Erdemir BUY, although the stock may be under pressure from overhang risk. We upgrade Ferrexpo to BUY (from Hold) after the recent sell-off; and downgrade Raspadskaya to HOLD (from Buy) on weak 1Q12 operating results. Our sector rating and TP changes are set out in Summary sector ratings and target prices, in the attached. |
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| 6. Euro area unemployment rate at 10.9% |
| Eurostat |
| May 3, 2012 The euro area (EA17) seasonally-adjusted unemployment rate was 10.9% in March 2012, compared with 10.8% in February. It was 9.9% in March 2011. The EU27 unemployment rate was 10.2% in March 2012, stable compared with February. It was 9.4% in March 2011. Eurostat estimates that 24.772 million men and women in the EU27, of whom 17.365 million were in the euro area, were unemployed in March 2012. Compared with February 2012, the number of persons unemployed increased by 193 000 in the EU27 and by 169 000 in the euro area. Compared with March 2011, unemployment rose by 2.123 million in the EU27 and by 1.732 million in the euro area. Among the Member States, the lowest unemployment rates were recorded in Austria (4.0%), the Netherlands (5.0%), Luxembourg (5.2%) and Germany (5.6%), and the highest in Spain (24.1%) and Greece (21.7% in January 2012). Compared with a year ago, the unemployment rate fell in eight Member States and increased in nineteen. The largest falls were observed in Lithuania (17.5% to 14.3% between the fourth quarters of 2010 and 2011), Latvia (17.1% to 14.6% between the fourth quarters of 2010 and 2011) and Estonia (13.9% to 11.7% between the fourth quarters of 2010 and 2011). The highest increases were registered in Greece (14.7% to 21.7% between January 2011 and January 2012), Spain (20.8% to 24.1%) and Cyprus (6.9% to 10.0%). Between March 2011 and March 2012, the unemployment rate for males increased from 9.7% to 10.8% in the euro area and from 9.3% to 10.2% in the EU27. The female unemployment rate rose from 10.2% to 11.2% in the euro area and from 9.6% to 10.3% in the EU27. In March 2012, 5.516 million young persons (under 25) were unemployed in the EU27, of whom 3.345 million were in the euro area. Compared with March 2011, youth unemployment increased by 303 000 in the EU27 and by 163 000 in the euro area. In March 2012, the youth unemployment rate was 22.6% in the EU27 and 22.1% in the euro area. In March 2011 it was 21.0% and 20.6% respectively. The lowest rates were observed in Germany (7.9%), Austria (8.6%) and the Netherlands (9.3%), and the highest in Greece (51.2% in January 2012) and Spain (51.1%). |
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| 7. Romania president's future hangs in the balance |
| bne |
| May 3, 2012 The surprise collapse of Romania's government on April 27 has ushered in a new period of political uncertainty that could even mark the beginning of the end for President Traian Basescu. The installation of a new cabinet in the run-up to a wave of elections in the next few months means that the country's leadership is in a state of flux. Romania badly needs economic impetus, and leadership that can reassure both the restive populace and investors. Romania is in the midst of an International Monetary Fund (IMF) review of progress being made to meet the terms of a €5bn international loan; the fund is unlikely to look kindly on the incoming government's economic promises. It is far from apparent that any potential government can deliver government that is not only effective but popular and clean. After the government of Prime Minister Mihai Razvan Ungureanu was defeated in a parliamentary vote of confidence, the opposition leader Victor Ponta was rapidly installed as Romania's third prime minister this year. Ungureanu had been premier for less than 80 days, having succeeded Emil Boc after the latter resigned in February following weeks of anti-government street protests. Ponta will now assemble a cabinet and present it to parliament for approval within the week. If successful, he will then take his government on to contest this year's local elections in June and a parliamentary election due by November. The result of the vote of confidence came as something of a surprise, not least as Ungureanu's government had secured parliamentary backing when appointed in February. But his coalition, dominated by Basescu's Democratic Liberal Party (PDL), has seen support seep away as it becomes increasingly apparent that it faces devastating losses in the elections. Political parties are still fluid concepts in Romania, with fickle and opportunist parliamentarians swapping sides and an alphabet soup of parties and coalitions emerging and then waning. Indeed, the PDL itself was largely formed from defectors from other parties, including the National Liberal Party (PNL), which is now part of Ponta's Social Liberal Union (USL). "Politicians in the ruling party started to think about their own careers," Romanian columnist and blogger Dan Tapalaga tells bne. "They didn't see any expectations of success. For some time, the party has been dominated by chaos and lack of discipline. In 2008, many members joined from the PNL, and now the move is in the other direction; the PDL's own logic is being applied to it." Click to read more |
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| 8. Tymoshenko hunger strike a political football for Ukraine |
| bne |
| May 3, 2012 Jailed former prime minister Yulia Tymoshenko's hunger strike could escalate into an international crisis as she fights major new charges being brought against her. Hunger strikes impact health in a major way after four weeks and can cause death after two months. By the time the Euro 2012 football championships kick off on June 8 to be co-hosted by Poland Ukraine Tymoshenko will be in the sixth week of her hunger strike and presumably in a severely weakened state of health. Ukrainian authorities may force-feed her, Tymoshenko has said, but this will simply pile fuel on the scandal. Tymoshenko's family are already sounding the alarm. Her daughter Evgeniya Carr in a statement May 2 on her mother's website said: "Mum's hunger strike is in its 12th day. We are very concerned about the state of her health. Now it's holidays and we cannot visit her and don't know what could happen to her during this time." Diplomatic pressure on Ukraine snowballed on publication of apparent images of bruising to Tymoshenko's stomach and arms, after she was forcibly hospitalized for back treatment April 21. An increasing number of European politicians, first and foremost German chancellor Angela Merkel and European Commission President Jose Barroso, have said they will not attend any of the tournament's games held in Ukraine after publication of the pictures and Tymoshenko's claims she was beaten. But an obviously emaciated, even dying Tymoshenko juxtaposed with the opening of the Euro 2012 football extravaganza would cause a scandal of a different dimension. Indeed, it is difficult to see the tournament going ahead as planned if Tymoshenko sticks to her hunger strike. The question is whether she wants it enough to go the distance? Click to read more |
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| 9. Students hospitalized after free milk fiasco in Turkey |
| Hurriyet Daily News |
| May 3, 2012 On the first day of a recent government project overseeing the distribution of free milk in state schools, hundreds of students around Turkey were hospitalized after drinking their milk. More than 1,000 students went to hospitals complaining of poisoning in nine cities and a number of towns in Turkey yesterday. Education Minister Omer Dincer said the students had not been poisoned, but "had sensitivities to milk," while Deputy Prime Minister Bulent Arn claimed that "the students got sick since they drank milk for the first time in their lives, or they drank too much." Click to read more |
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| 10. Unlicensed foundry blast kills worker in Turkey |
| Hurriyet Daily News |
| May 3, 2012 Unlicensed foundry blast kills worker The foundry workshop where a blast killed a worker and injured another yesterday in the Istanbul district of Bayrampasa was unlicensed and had been sealed off in 2010, according to a statement issued by the Istanbul Metropolitan Municipality. Municipality officials inspected the Ozbir Metal Stainless Steel Company on April 15, 2010 and determined that it was unlicensed, as a result of which law enforcement officials consequently sealed it off on May 13, 2010 and ordered the termination of its activities, said the statement. Click to read more |
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| 11. Armenians launch large campaign against Turkey |
| Hurriyet Daily News |
| May 3, 2012 U.S. Armenians have launched one of their largest donation campaigns to "help bring down Ankara's last firewalls against the justice Turkey owes the Armenian nation," the biggest and most influential U.S. Armenian group said on the weekend. Armenian National Committee of America (ANCA) chairman Ken Hachikian urged Armenians to donate funds to strengthen Armenia and pass the Armenian genocide bill pending in the U.S. House of Representatives and the Senate. Click to read more |
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| 12. Turkey may be regional power, out of EU in 2030 |
| Hurriyet Daily News |
| May 3, 2012 Turkey is likely to become a pivotal regional power by 2030, but it is not clear whether it will be a European Union member by that date, according to a recently released report conducted by the European Union Institute for Security Studies (EUISS) upon a European Parliament request. "Turkey is likely to become a pivotal regional power. Turkish citizens, capital and institutions will continue to integrate with the global economy and network society; and ties with the EU and Turkey's immediate neighbors and other regions will become deeper and denser," said the Global Trends 2030 report, released on April 27. The report looks at the impact of an increasingly empowered global citizenry on the international system and is produced for the European Strategy and Policy Analysis System (ESPAS). Click to read more |
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| 13. Health tax to be levied on cigarettes in Turkey |
| Hurriyet Daily News |
| May 3, 2012 The Turkish government has decided to implement a 1.5 Turkish Liras health tax on cigarettes to combat smoking related health expenses which amount to 2.8 billion liras or 9 percent of the country's total medical expenses, according to a report prepared in tandem by the World Health Organization and Turkish Social Security Institution (SGK). Click to read more |
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| 14. Italy wants to reach Arab Spring nations via Turkey |
| Hurriyet Daily News |
| May 3, 2012 Italian and Turkish firms can work together in business deals in the countries of Central Asia, the Balkans and the larger Middle East, top heads of business institutions from both countries said yesterday at the Italy-Turkey Economy Forum, which kicked off yesterday. "Turkey does not just have significance in terms of accessing former Soviet republics. The strategic importance of Turkey has increased due to the Arab Spring. People say they take Turkey as an example in Tunis and Egypt. Balkans is another region where strategic cooperation is possible," said Antonio Poaletti, the vice president of Union Camere (the Union of Italian Chambers), in his speech at the forum's first meeting. Click to read more |
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| 15. Turkish minister likens Turkey, Iraq to adjacent stores |
| Hurriyet Daily News |
| May 3, 2012 Turkey has no hidden agenda against Iraq's territorial integrity, Economy Minister Zafer Caglayan said yesterday, adding that Turkish firms would invest in various growing sectors within the neighboring country. Caglayan said Turkey and Iraq were like the owners of two neighboring stores who love each other, but never buy goods from one another. Click to read more |
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| 16. Bosch to put $250 mln in plant in Turkey's capital |
| Hurriyet Daily News |
| May 3, 2012 German industrial giant Bosch, one of the first foreign companies to show interest in the government's new incentive scheme, plans to invest $250 million towards a plant that will produce spare automotive parts currently being imported. The facility is expected to employ 8,000 people, according to daily Hurriyet. Bosch is likely to take advantage of the government's 5th zone incentives for "strategic investments," reports Hurriyet. Click to read more |
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| 17. The Freddie goes to Turkish Airlines |
| Hurriyet Daily News |
| May 3, 2012 Turkish Airlines was presented two Freddie Awards for the Europe/Africa region at a ceremony in New Jersey on April 26. The airline won "Program of the Year" for its Miles&Smiles program and "Best Affinity Credit Card" for its Miles&Smiles credit card program. "The Freddie Awards, which honor the world's best travel programs, have proven that all of our hard efforts have paid off," said Turkish Airlines' General Manager Temel Kotil in the company press release. Click to read more |
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