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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. Istanbul suffering flight delays |
| bne |
| May 4, 2012 Many travelers have noticed that Istanbul's largest airport, Ataturk, has been experiencing increasing delays in departures. bne has twice flown out of the airport in the past month: both flights were about an hour late in taking off due to heavy traffic on the runway. During the third week of April Ataturk airport received the questionable honor of being called the number one airport in Europe in terms of flight delays and second in cancellations. The ranking was based on a data provided by FlightStats, a website, which offers worldwide flight on-time performance information to the global travel and transportation industries. On Wednesday Turkey's Minister of Transportation, Maritime Affairs and Communications Binali Yildirim was questioned about the delays at a press conference in Leipzig, Germany on the sidelines of the International Transport Forum (ITF). Yildirim said that the government was working on the issue. The delays were taking place due to increasing numbers of flights from and to the airport, he added. In the past nine years, there has been around 8m flights annually at the Ataturk International Airport. This figure jumped to 38m in 2011. The airport size has stayed the same while the number of flights have increased by five fold. No one should expect things to continue as in the past at the Ataturk Airport, the minister highlighted. "We have taken a decision to construct a third airport in Istanbul. Once the third airport goes into service, things will get better," Yildirim reassured the reporters. Yildirim is not the only one who seems to think that a third airport would be the best solution for the traffic problem. THY Chairman Hamdi Topcu said in an interview on Haberturk TV last Monday that Istanbul needs a third airport, apart from Ataturk International Airport and Istanbul's Sabiha Gokcen International Airport, as soon as possible. According to Topcu, Ataturk International Airport doesn't have the capacity to meet growing demand. The capacity can be increased by taking over the operation of a nearby military airport and moving the military functions to another location in the city, he said. "By doing this the capacity of the airport can be increased because more runways will be provided at the airport," Topcu added. THY lost around $110m in 2011 due to delayed or canceled flights resulting from capacity problems at the airport, that forced them to compensate passengers for hotel rooms and meals, said Topcu. "Who would cover that loss?" he asked. Istanbul Mayor Kadir Topbas announced in 2010 that the city planned to construct another airport in the Silivri or Kemerburgaz districts. Things are finally moving forward and on the last week of April Yildirim announced that the government is planning to hold a tender this year for the construction of a third airport for Istanbul. |
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| 2. Stubborn inflation, or diving growth which wins in Turkey? |
| Commerzbank |
| May 3, 2012 Contrary to market commentary, the latest inflation data do not refute the CBRT's forecast of inflation moderation over the coming quarters. If anything, world commodity price driven inflation appears to be an ever receding threat. What is more, the CBRT's tight monetary policies since last Q4 are having a visibly dampening effect on growth and credit; PPI inflation a lead indicator is falling; capital goods orders are falling. At this time, there is significant pressure on the central bank to keep policy tight, but circumstances are likely to change. - The arguments in support of the central bank's forecast of 6.5% inflation rate by year- end are clear, at least in direction. In an earlier report "Turkey: Inflation outlook to improve because of lira", 17 February, we laid out the case; in our charts below, we update some of the leading inflation indicators and key drivers. - Even before the lira had stabilised earlier this year, and before commodity prices were heading down, the CBRT projected a declining inflation path until year-end. The central bank's view was that cumulative import price increases and lira weakness, combined with taxes on tobacco and price hikes in fuel, had pushed up inflation. But, these factors were to prove temporary and the direction of inflation turn down. Despite such a relaxed prognosis, the CBRT acknowledged that it would have to fight hard to keep inflation expectations in check. - The April CPI reading did not jump outside the CBRT's latest projection band but it rose all the way to the top (see chart 1). The band itself projects inflation turning noticeably down over the coming quarters, reaching between 5.3% and 7.7% by year- end. That the April data rose to the upper-end of the band does not make the band obsolete. But, we would no longer be surprised to hear MPC statements to the effect that inflation risks have risen. - The behaviour of world commodity prices especially when converted to lira has been anything but worrying (see chart 5). And PPI is responding to this driver as it usually does no problem there either (see chart 5). The peaking sign from core-CPI (chart 6), and the moderation in Turkish credit growth and new-orders (chart 3), keep us relaxed about inflation, no matter what the near-term noise suggests. - Policy outlook: That said, it is clear that the CBRT will have to balance priorities between supporting growth and controlling inflation expectations. Inflation expectations may not remain relaxed just because forecasters predict moderation. For this reason, any easing of the rate corridor or overnight rates now appears unlikely until a clear inflation down-trend has been established. We, however, expect just such a down-trend. Inflation has surged, but that is backward looking A quarter ago, the Turkish central bank was signalling the likely end of inflation acceleration by Q1 2012, predicting that core-inflation would sustainably moderate by then. The bank even lowered its overnight lending rate in February. But the central bank got caught on the wrong foot when the oil prices rallied and energy components of inflation began to rise region-wide. Accelerating energy prices at home prompted the CBRT to promise 'controlled monetary tightening' in the months ahead. We do not think that recent world food or energy price movements, nor lira movements, pose much of an inflation threat. Indeed, chart 5, which captures imported inflation pressure, appears to be particularly reassuring in this regard (especially because PPI inflation is following the lead as it usually does). What is surprising is that few market commentators appear interested in explaining why PPI inflation has come down so noticeably. Chart 2 highlights the stark divergence between CPI and PPI trends in latest months. One driver of the divergence which immediately strikes us is that the two have been subject to dramatically opposed base-effects CPI inflation was around 4% this time last year, while PPI inflation was accelerating following a steadier trend. Over time, however, CPI inflation caught up with the PPI trend. We are probably now witnessing in terms of CPI what we observed on PPI a quarter ago (PPI inflation was 13%-plus at end-2011). Granted, there are food price, tax and administered fuel price components influencing CPI which have crucial impact at the moment. But, core-inflation appears to be peaking, with a lag to PPI inflation, just as the historical lead-lag relationship has been. Note that core-CPI is also coming from the same 'low year ago base' as headline CPI is (see chart 6) hence, core-inflation is still relatively elevated. The energy price situation, of course, is still a genuine threat; oil prices could rebound at any time. As chart 4 shows, the CBRT has recently upped its projected path for oil prices compared to what it projected in January; but, this is a simple step shift up, to reflect how much the spot price had risen to, not a change of trend. Now that the spot price has significantly retreated, one might assume that the oil price threat has eased, even in the CBRT's eyes. The April CPI data were heftily pushed up by clothing and footwear up 13% month-on-month compared with 1% increase the previous month. The housing, water and electricity (utilities) prices were also up 13% year-on-year compared with c.9% rate of increase in recent months. Similarly, petroleum and metal categories within PPI still showed elevated inflation in April 24% and 13% respectively but these are moderate compared with the 50% and 25% rates of increase around the beginning of the year. Policy conclusions We have been highlighting that the oil price this year is not markedly higher, year-on-year our house forecast of $118 by year-end would imply 5% average year-on-year increase this year, far less than the 39% increase which occurred last year. The CRB composite commodity price index in lira terms has nose-dived from 50% year-on-year last September to negative now. The lira itself, at present levels, would be 5% stronger year-on-year for much of H2. The April data aside, CBRT's guidance of moderating core-inflation has proven correct. Going forward, we think that the oil price and global risk environment would both remain supportive of emerging market assets special currency defence intervention from the CBRT may not be required this year. The narrowing of the current-account gap would also be a crucial contributor to stability. In this latter respect, through, we are more skeptical that Turkey's current-account problems have been solved. Still, the market appears to buy into the recent improvement (which we think will last for only as long as growth remains weak). Growth is turning weak chart 3 offers tangible evidence through the slackening of capital goods orders. CBRT will have to balance its priorities between weakening growth and controlling, not inflation, but inflation expectations. That the central bank and some forecasters predict that inflation will moderate does not help inflation expectations are very tricky (and sticky) in Turkey. For this reason, any easing of the rate corridor or overnight rates will have to wait until a clear inflation down-trend is observed. We expect such a down-trend. |
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| 3. Turkey: Focusing on catalysts |
| BGC Partners |
| May 4, 2012 Range bound trading for the past three months... Following a 12% rise in January 12, Turkish equities have been stuck in a tight range between 58k and 63k for the past three months. While excess liquidity limits the downside, deteriorating inflationary outlook, persistent C/A deficit worries and perhaps more importantly, the fatigue in investor sentiment amid negative news flow from Europe capped the upside potential. MSCI-Turkey has risen by 21% YTD, outperforming MSCI-EM and MSCI-Russia by 8%. Catalysts... Potential revision in earnings estimates: - Upward revision in non financials is likely, but it is difficult to judge the direction for banks right now. We have witnessed a 4% upward revision in banking sector consensus earnings estimates as indicated by Bloomberg since January 2012. While Garanti Bank and Akbank's 1Q12 earnings have been somewhat above estimates, further upward revision appears to be difficult at this stage as NIM expansion is hard to achieve and loan growth remains under pressure. As for non-financials, strong TL is certainly good news for companies with short net FX position and better than expected top line performance in 1Q12 leads us to believe that upward revision to the earnings estimates are in the works. Weak European growth: European Central Bank's LTRO program has resolved the European banks' liquidity problem but economies are still struggling to grow given the austerity measures. The risk from Turkey's perspective is two-fold. The first one is fundamental; if European growth problems take a turn for the worse, the good start to the year in export performance may start to falter in coming months, highlighting the C/A related problems once again. The second and more sentimental issue is that the ongoing selling pressure in European banks which own 36% of the Turkish banking assets, do not bode well for the bank dominated Turkish market. Equity supply: Equity offerings have been largely put on hold but potentially large deals such as Citibank's stake sale in Akbank or Finansbank's much desired SPO as well as smaller deals such as Teknosa may soon come to the market. Potential positive surprises... Oil price is certainly a key parameter for Turkey, which imports 97% of its petroleum need. Concerns on global growth but, more importantly, the talks between Iran and developed nations on May 23 may remove some of the supply related pressure on oil price. Another important but not so imminent positive surprise could be on the inflation front. CBT's renewed commitment to tighter monetary policy is good news for TL. A lower than expected oil price combined with strong TL may provide the much needed support to CBT's inflation target, perhaps pulling the year end estimates to around 7% later in 2H12 (BGC 12YE estimate: 8.4%) What to do... Strong TL and declining long term yields are hardly bad news for equities. 10-year Turkish government bond yields declined by 54bps to 9.16% over the past month (We use 9.50% as risk free rate) As for absolute performance, we maintain our 12-month target level for ISE-100 at 67k but expect the market to remain in 58-63k range in the near term. We would be buyers should the market drop to around 56-57k, corresponding to around 9.0x PER. We believe that it is hard to justify a PER of above 11.0x for Turkish equities (currently at 9.6x 12E) because once the risk appetite vanishes Turkey will be again on the fore front posing as a risky bet among its peers. As for relative performance, we continue to believe that Turkey will outperform MSCI-EM in 2012, albeit in single digit territory. We recommend a neutral stance between banks vs non-financials in the near term and expect good stock picking as the key tool to outperform ISE-100 once again. We particularly like Emlak REIT, Tekfen Holding and Turk Traktor in this environment. Our Long-only portfolio has risen by 25% YTD, outperforming ISE-100 by 10%. Our Most& Least Preferred Stock List as well as the performance summary of our Short-only and Long/Short strategies can be seen on page 6 and 7. |
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| 4. Turkey's privatisation blues |
| bne |
| May 4, 2012 In the normal state of affairs, the failure of a third successive attempt at privatising a state company would be regarded as an indication that the company in question is unsaleable. Yet in the case of Turkey's Baskent Dogalgaz monopoly gas distributor in the Turkish capital Ankara the lesson of the failure of a third attempted privatisation on April 27 is somewhat less explicit. The sale of 80% of Baskent succeeded in attracting sealed bids from four highly successful, well-respected Turkish companies. However, despite the highest sealed bid reaching $585m, none of the four were willing to match the $626m base price selected by Turkey's Privatisation Authority (OIB) as the starting point for open bidding an unexpected development given that the two previous failed tenders had resulted in winning bids of $1.61bn and $1.21bn, respectively. While there is a clear thread linking the failure of the third tender to its two failed predecessors, it isn't a simple reflection on Baskent's commercial success or of its potential. The company is profitable and last year recorded sales of 2.3bn cubic metres (cm) of gas to 1.34m subscribers and is reckoned to have the potential to add a further half million subscribers over the next decade. Rather, the problem lies largely with the difficulty that is being experienced by bidders in raising credit in the midst of ongoing global financial turmoil. Click to read more |
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| 5. Better connected transport will drive greener growth |
| OECD |
| May 4, 2012 OECD Secretary-General Angel Gurria launched today the Transport Outlook 2012 during the Annual Summit of Transport Ministers from the 53 member countries held in Leipzig, Germany. The creation of seamless transport systems that combine greener mobility solutions with more efficient networks will boost economic growth while better protecting the environment, according to this latest annual report on mobility trends produced by the International Transport Forum at the OECD. "Transport and technology form the backbone of global trade," said OECD Secretary-General Angel Gurra at the presentation of Transport Outlook 2012. "Connecting places and people creates opportunities for new markets and better connections can increase productivity. Making well-targeted investments in new capacity and intelligent, smart mobility technologies and ensuring their best possible use can provide a new source of growth." According to the Outlook, entitled "Seamless Transport for Green Growth," the transport sector could play a key role in moving the world economy towards a more sustainable path. "Going green in transport does not mean giving up mobility: it implies mobility with a smaller environmental footprint," said Mr. Gurria. "Thinking seamless is a bid to align mobility aspirations with aspirations for greener growth." Key findings of the 2012 Transport Outlook include: Mobility will grow strongly, particularly strong outside the OECD area: -Global passenger transport volumes could be 2 to 2.5 times as large in 2050 as they are now. Outside the OECD, passenger volumes could rise by a factor of 2.5 to 3.5; in the OECD growth could be around 30%. -Global freight transport volumes in 2050 could be 2 to 4 times as large as they are today. Within the OECD, freight volumes could double; outside the OECD they could be more than five times as large. CO2-emission will grow less than mobility due to carbon-saving technologies: -CO2-emissions from transport could grow by a factor of 1.5 to 2.5 between 2010 and 2050. -In advanced economies, emissions from passenger transport can be stabilised thanks to improved technology. Freight transport emissions will still rise, however, unless freight transport grows only half as fast as GDP. -In emerging economies and developing countries, mobility growth is expected to be larger and emissions will grow strongly. This assumes some new technology deployment, with more efficient standard vehicles and hybrids, but not many alternative-fuel vehicles. Mobility policy can slow down emission growth but a policy commitment is needed: -Passenger mobility policies could reduce emission growth outside the OECD by anywhere from a quarter to one-third by 2050. Slowing-down emissions growth requires strong, enduring policy commitment. A range of measures is needed for balanced mobility, including, but not limited to: integrating public transport, to make it more seamless and more appealing to users; limiting network capacity for cars, to achieve more efficient network use; and not providing free parking. Emission growth means that energy technology is key: -In 2011 it was estimated that car fuel economy would need to double, at the very least, to stabilize emissions - from about 8 litres/100 km in 2008 to just under 4 litres/100 km in 2050. -Internal-combustion engines can be made much more efficient, and downsizing cars contributes strongly to reducing energy intensity. The immediate adoption of increasingly stringent fuel-economy regulations will promote this transition. -In the longer run, policy should be used to stimulate alternative energy sources. Diversity in transport energy is preferred to replacing fossil fuels with another dominant source. Electric vehicles are a good technological fit where there are short but frequent trips, including taxi markets and delivery of goods in urban environments. |
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| 6. Economic outlook more uncertain |
| Erste |
| May 4, 2012 At yesterday's s meeting, M. Draghi put (as expected) a greater emphasis on growth. The economic outlook has become more uncertain, according to the president, leading the ECB to discuss the general monetary policy stance extensively (but not changes in the interest rate). He said Latest survey data for the euro area highlight prevailing uncertainty. Hence, the central bank will wait for the next meeting to be clearer, when more data is available. The effects of the 3Y LTROs have to be understood fully and that takes time before their impact can be assessed. Overall, this confirms our expectation that the ECB will wait to get more clarity about the efficiency of measures taken so far as well as the extent of downside risks to the economy before taking further action. We expect the generous provision of liquidity to be continued; announcements will be made in June, according to Draghi. We will publish our updated rate and yield expectations in tomorrow's "Interest rate outlook". Finally, Draghi also said that "we have to put growth back to the center of the agenda". The president proposed to create a growth compact and put emphasis on labor market reforms, as well as facilitating entrepreneurial activities to foster innovation and job creation. We fully agree with the central bank that innovation and labor market reforms are crucial (see "Eurozone: Focus on Growth"). Hence, Draghi's emphasis might contribute to fostering measures taken with respect to growth. On the markets, yields increased and the euro strengthened, but this might also have been driven by the surprising decline in US initial jobless claims released at the same time. |
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| 7. Industrial producer prices up by 0.5% in euro area |
| Eurostat |
| May 3, 2012 In March 2012, compared with February 2012, the industrial producer price index1 rose by 0.5% in the euro area (EA17) and by 0.6% in the EU27. In February prices increased by 0.6% and 0.9% respectively. In March 2012 compared with March 2011, industrial producer prices gained 3.3% in the euro area and 3.8% in the EU27. Monthly comparison In March 2012, compared with the previous month, prices in total industry excluding the energy sector increased by 0.2% in both the euro area and the EU27. Prices in the energy sector rose by 1.4% and 1.8% respectively. In both zones, intermediate goods gained 0.3%, non-durable consumer goods 0.2% and capital goods 0.1%, while durable consumer goods remained stable. Among the Member States for which data are available, the highest increases in the total index were recorded in Greece and the United Kingdom (both +1.2%), Lithuania (+1.1%) and Cyprus (+1.0%). The only decreases were recorded in Sweden (-0.5%), Hungary and Austria (both -0.1%). Annual comparison In March 2012 compared with March 2011, prices in total industry excluding the energy sector increased by 1.5% in the euro area and by 1.8% in the EU27. Prices in the energy sector gained 8.5% and 8.6% respectively. Non- durable consumer goods rose by 2.8% in the euro area and by 3.1% in the EU27. Durable consumer goods increased by 2.3% and 2.2% respectively. Capital goods gained 1.1% in the euro area and 1.2% in the EU27. Intermediate goods rose by 0.9% and 1.2% respectively. Among the Member States for which data are available, the largest increases in the total index were observed in Latvia (+10.0%), Cyprus (+8.8%) and Hungary (+7.4%), and the smallest in Malta (+0.5%), Slovenia (+0.6%) and Austria (+1.6%). The only decrease was recorded in Sweden (-0.5%). |
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| 8. Greece: Outcome of elections is still uncertain |
| ING |
| May 3, 2012 Against an extremely volatile political backdrop, Greek vote polarisation will likely fall markedly on 6 May. Whilst a re-run of a ND-PASOK alliance still looks likely, alternative outcomes cannot be ruled out. The upcoming 6 May elections will mark the end of the brief Papademos tenure. Mr Papademos, a former vice president of the ECB, took on his office in December, with a specific mission: securing the deal on bailout 2.0, starting a season of reforms and taking the country by hand to new elections. Unlike the Monti government in Italy, the Papademos one was not a genuinely technocratic one. Only Papademos himself did fit the definition; other government members were in fact officials coming from the supporting ND, Pasok and for a short time, from right wing Laos. The promiscuous nature of the cabinet can be explained when considering the political environment, which characterised Greece when the former Papandreou government had to resign, back in November. These were the days when Papandreou had even considered calling a referendum on Greece remaining part of the Eurozone or leaving it. Contagion on other peripherals had reached levels which called for decisive action to prevent the fire from becoming uncontrollable. It was thus of the essence to secure the backing parties' support to Papademos through a direct involvement of their officials in the government. The short electoral campaign has been inevitably affected by the very delicate underlying economic situation. ND and Pasok, the backers of the outgoing national solidarity government, have been moving along a fairly narrow path: constrained by their institutional role, they had to re-affirm their ownership of the adjustment while at the same time trying to differentiate each other and shedding some glimmer of hope about the possibility of some softening (or, at least, delaying) of the fiscal adjustment. Other parties have more freely been leveraging on popular anger over the prolonged adjustment, in some cases flirting with the idea of Greece exiting the euro as a shortcut to long-term sacrifices. The resilient support of Greeks for membership of the Eurozone consistently shown in opinion polls (over 75% of Greeks are reportedly still in favour) has prevented many radical parties on both sides of the political spectrum from riding openly the anti euro wave; instead, they generally made the anti-austerity call their electoral manifesto. Such a neat stance will likely make it very unlikely that they will be involved in a future government. In fact, even assuming a possible softening (or delay) in the conditions imposed by international lenders, a sufficiently severe adjustment will remain a necessary condition for the continuation of disbursements of bailout 2.0 money. A reminder that continuity in the fiscal adjustment will remain unavoidable after the elections came on 24 April by George Provopoulos, the chief of the Bank of Greece. In an unusual political statement, he warned that economic recovery depends upon a "strict adherence with the economic reforms and fiscal adjustment commitments Greece has agreed with its Eurozone partners." He also added that if Greece failed to stick to its pledges after the election, then Greece's Eurozone membership would be at stake. The Greek electoral system assigns 250 out the total 300 seats on the basis of proportional representation (with a 3% threshold), while the remaining 50 seats are assigned to the leading party. Opinion polls run until the 21 April start of the blackout period have been confirming a clear reduction in the polarisation of preferences ahead of the vote. The long-held Pasok- ND domination of the political market seems now dramatically reduced. If in February 2011 the two parties were indicated as attracting together more than 65% of preferences, in April 2012 their combined possible result was indicated at 35-40%, with Pasok's support more than halved and ND expected to lose almost a third of its preferences. Concurrently, polls indicated that the hard left party SYRIZA and communists of KKE could each obtain around 10% of preferences, slightly above DIMAR, a social democratic party. To give the sense of how volatile preferences are in the run-up to the vote, the anti- austerity right wing Independent Greeks (ANEL), a party founded in March 2012 by a former MP member of New Democracy, was indicated by the last available public domain opinion polls close to 10%. According to the polls, some nine parties have very good chances to pass the 3% threshold and obtain parliamentary representation, and one more could yet make it too. The extremely volatile political environment makes any guess about the final result a highly prone-to-error exercise. The final outcome might still be determined by the sways of the swarms of undecided voters at the very end of the campaign. What seems extremely likely is that no single party should be any close to obtaining an absolute 151 seat majority. Based on the last public poll result a re-run of the current ND-PASOK solidarity coalition might in principle reach the absolute majority in parliament, mainly thanks to the 50 seats premium which would be earned by ND. However, the parliamentary majority such a coalition would enjoy might turn out a thin one. Should this be the case, some attempts to enlarge the majority would be likely made, involving parties willing to commit to support the austerity programme. This likely condition would restrict the domain of possible candidates to small parties that could eventually pass the 3% threshold. Market-wise, an eventual ND-PASOK ticket would likely be perceived as the best solution. Both party leaders already committed to austerity, and possible post-electoral requests for a revision of the package (more probably slowing down its pace so long as deep recession lasts) from their side, would unlikely be so big as to jeopardise the continuation of the programme, in our view. Should ND and PASOK fail to break the 151-seat threshold, the picture would clearly get more complicated. In a political vacuum, the transversal anti-austerity movement would be even more tempted to raise its tones, likely injecting extra uncertainty in the market. The search of a solution would likely take more time, leaving Greek paper exposed to higher volatility and other peripheral sovereign spreads under increasing pressure. |
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| 9. A new driving force in Russia |
| bne |
| May 4, 2012 Chinese sales of cars to Russia are booming, but major problems need to be addressed if the Middle Kingdom's cars will continue to enjoy that success. Between 2006 and 2008, Russia was the biggest importer of Chinese cars in the world; in 2007 alone, Chinese carmakers sold about 57,000 cars in Russia. But the young Chinese automotive producers are also starting to struggle with some traditional structural problems. Sales have been growing so fast that makers have begun to face a shortage of spare parts and after-sales service has become overloaded. At the same time, the manufacturers have not solved all their safety issues and Chinese cars are not well adapted to the tough conditions of driving on Russian roads. The 2008 financial crisis caused even more serious problems. As the Russian car market collapsed in the aftermath of the global meltdown, sales stopped completely after the Russian government imposed temporary protectionist measures to support Russia's home grown carmakers. China was forced to withdraw from the Russian market and total sales in 2009 fell to a mere 7,400 cars. As the crisis recedes, sales have begun to recover. The total number of cars sold in Russia has grown from 1.4m in 2009 to 2.65m in 2011. Chinese carmakers have been enjoying the recovery even more than the domestic carmakers. For example, China's Geely's sales increased by 212% in 2011 from the year before to 6,000 units and Lifan's by 133% to 17,900, both of which make mid-priced cars aimed at the middle class. Click to read more |
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| 10. Minor court case sheds light on major Ukrainian corruption scandal |
| bne |
| May 4, 2012 In 2011, the UK shell company Highway Investment Processing became a household name for corruption in Ukraine when it sold an offshore drilling rig to a state oil company for nearly double the original purchase price, apparently pocketing over $100m in the process. But after scouring Ukrainian court and foreign-trade documents, bne can reveal this was not the first suspicious deal Highway was involved in: four months before the $400m oil rig tender, Highway contracted to sell a second-hand printing press to a provincial Ukrainian eggbox producer for $270,000 - but failed to deliver. The minor transaction points to Highway operating as a money carousel, run by Latvian banks to rotate clients' money in and out of Ukraine. It puts another question mark over the massive procurement deals carried out by Ukrainian state-owned Black Sea oil and gas driller Chornomornaftogaz in 2011, which totalled $950m for two rigs and support ships. Far from being legitimate special purpose vehicles for asset sales, the UK shell companies like Highway winning these tenders seem from the start to have been vehicles for offshore money processing. So while speculation swirls around who were the beneficiaries of Highway, the answer may be simple: no one. The pattern of transactions points to it operating as part of a money-transiting "carousel" used to rotate payments through a chain of companies out of Ukraine and then back in again, with the operators taking commissions from the funds thus processed. Click to read more |
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| 11. Catholic Armenians fight to regain school in Turkey |
| Hurriyet Daily News |
| May 4, 2012 Turkey's Catholic Armenians are waging a legal battle to retrieve the property rights for an Armenian Catholic school that was confiscated by the Foundations Directorate General, despite the fact that it had not been proclaimed under the 1936 Declaration. "We paid for the building's purchase, and we are in possession of its title deed. We also have the document [showing] the back-then Istanbul governor's approval for the purchase, but we are paying rent nonetheless," Rita Nurnur, head of the Armenian school's foundation, told the Hurriyet Daily News. Click to read more |
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| 12. Father sells 13-year-old daughter for gambling debt in southern Turkey |
| Hurriyet Daily News |
| May 4, 2012 A 13-year-old girl, who was sold by her father to cover a gambling debt, has been rescued by police in the southern province of Adana, Dogan news agency reported today. The girl, S.C., reportedly disappeared on Apr. 4 in southeastern province of Sanliurfa. Her mother reported the situation to Sanliurfa prosecutors and claimed that her husband could have sold the girl to 20-year-old Mehmet Karamus, because of his gambling debt. Click to read more |
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| 13. State of media freedom worsening in Turkey, press groups caution |
| Hurriyet Daily News |
| May 4, 2012 International Press Institute (IPI) and Turkish Journalist Association warn against the worsening situation of media freedom. The decline of media freedom continues The decline of media freedom in Turkey is continuing, the Turkey Journalists Association (TGC) Executive Board points out in a statement on World Press Freedom Day, May 3. Click to read more |
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| 14. Municipality dumps waste to organic basin in Turkey |
| Hurriyet Daily News |
| May 4, 2012 The municipality has been using a river basin, named Organic Agriculture Basin, as a waste dump in Hemsin Valley in the Black Sea region, daily Milliyet reported. Locals near the waste dump site have complained of the "filth" and smell collecting near their homes. Animals graze in fields near the dump site, causing concern about the risk of severe health problems in the future. Click to read more |
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| 15. Provocative claims will not affect members, say Turkish Armed Forces |
| Hurriyet Daily News |
| May 4, 2012 The Turkish Armed Forces General Staff released a written statement today saying members of the army will not fall into the provocative traps set by "certain writers, speakers and members of certain occupations." "It is being watched in sorrow that provocative statements outside constructive boundaries target members of the armed forces in order to reduce their motivation," the statement continued. Click to read more |
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| 16. Turkey not master of Mideast, says FM |
| Hurriyet Daily News |
| May 4, 2012 Turkey's Foreign Minister Ahmet Davutoglu has said that when he described Turkey as playing a pioneering role in the Middle East, he did not mean it in a "hegemonic sense." "We are the owners of this region with all the other nations, we own the problems of the region, this does not mean it is our property, it means solving the problems of the region shoulder to shoulder with the other nations," Davutoglu said at a conference held in Istanbul. Click to read more |
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| 17. Turkey's opposition leader's right-hand man submits his resignation |
| Hurriyet Daily News |
| May 4, 2012 Turkey's restive main opposition was hit by fresh turmoil yesterday as the right-hand man of party leader Kemal Kilicdaroglu submitted his resignation, disgruntled with long-running disagreements over the party's vision and a row over how to organize its influential Istanbul branch. Kilicdaroglu sought to dissuade Tekin from quitting, but the latter was determined to go, party sources said. Tekin was not present at the MYK meeting. There were rumors that his resignation could prompt other heavyweights to follow suit. At least one of them, secretary-general Bihlun Tamayligil, signalled at the MYK meeting that she might also consider stepping down, sources said. Click to read more |
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| 18. Turkey's Government, AKP cool to offer for release of jailed MPs |
| Hurriyet Daily News |
| May 4, 2012 Senior Justice and Development Party (AKP) officials gave the cold shoulder yesterday to a joint opposition proposal for the release of the eight jailed lawmakers, dashing hopes that a compromise could be reached in the short term. Deputy Prime Minister Bekir Bozdag said the proposed amendment contained "many legal drawbacks," while AKP deputy chairman Omer Celik argued that it might result in unwanted consequences in the future. "We do not say that the current situation should continue, but more work is needed on the issue," Celik said on the CNN Turk channel, reiterating charges that the opposition parties created the deadlock themselves by selecting candidates from prison at last year's general elections. Click to read more |
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| 19. ERBD's strategy for Turkey |
| ERBD |
| May 4, 2012 Turkey is committed to and applying the principles of multi-party democracy, pluralism and market economics in accordance with the conditions specified in Article 1 of the Agreement Establishing the Bank, although some challenges remain. Turkey has made significant progress in domestic political reforms by enhancing institutional checks and balances, bringing civil-military relations in line with democratic principles and opening dialogue with the country's minorities, including its Kurdish community. These steps have moved Turkey closer to meeting the political accession criteria in its negotiations with the EU. Areas for further reform include freedom of expression, women's rights and freedom of religion. Since initiating operations in Turkey in 2009 the Bank signed a total of 55 projects with cumulative investment value of close to Euro 1.6 billion. Total project value of these investments was just under Euro 5 billion. Nearly all of this business was in the private sector with an emphasis on the micro, small and medium sized enterprise sector (particularly in more remote regions), which had difficulty gaining access to finance during the financial crisis and which was consistent with the Bank's strategy and core strengths. Turkey's economy has shown robust growth in recent years and its banks weathered the global financial turmoil well, as evidenced by their balance sheet strength. Earlier financial sector reforms set the foundations for the stability of the banking system today. Economic growth was 9.2 per cent in 2010 and slowed to 8.5 per cent in 2011, with signs of overheating starting to materialise. Growth in 2012 could slow significantly to around 2.5 per cent. Private sector credit, financed by foreign borrowing and a post-crisis return of short-term deposits, gradually fell from a high of 43 per cent year-on-year to 33 per cent year-on-year at end 2011. Throughout the year import growth has outpaced export growth, but fell from a factor of 2.5 in the first half of 2011 to 1.7 per cent at year end, as a result of rapid domestic demand growth and increased energy prices. As a consequence the current account deficit widened to 10 per cent of GDP in 2011. The deficit is financed by increasing FDI as well as relatively short-term public and private sector borrowing. Turkey's medium-term economic growth and reform prospects are good, notwithstanding certain vulnerabilities to further global financial turmoil. Recent reforms in the energy sector especially to promote private sector participation, energy savings and renewables as well as in the areas of competition law, labour market efficiency, improvements in the business environment and promotion of regional trade reinforce the prospects for sustainable growth and development. Although recent growth and progress in reform have been strong, significant structural reform challenges and associated transition gaps remain. Key transition challenges that can be addressed with EBRD financing and assistance include: -Increasing private sector participation, sustainability and efficiency in the energy sectors: While the Turkish economy as a whole is currently more energy efficient than the OECD average, the current system has difficulty accommodating demand pressures of a rapidly growing economy. -Developing mid-sized corporates in underdeveloped regions: While larger corporates in the commercial centres have access to a range of finance, mid-sized corporates, especially in the regions, still suffer from lack of access to longer term financial products and from weaker business and corporate standards. -Strengthening regional and rural infrastructure sectors: Municipalities, especially in the underdeveloped regions, have little debt capacity and suffer from inefficient operational management and service delivery for most utilities. The implementation of transparent PPP projects will help to attract more private sector investment into the infrastructure sector. - Supporting deepening of financial intermediation and local currency capital markets: Despite reasonably well-functioning financial markets at short maturities, there is a lack of efficient intermediation of long-term funds to under- funded sectors and uses. Strategic directions Considering the financial and economic environment, the country's remaining reform challenges and the early stage of the Bank's operations in Turkey, the operational priorities will remain consistent with the current strategy. The Bank's activities will remain focused on those areas where the transition gaps are significant and where the Bank's finance and expertise are additional to what commercial and non-commercial funding sources can provide. The Bank's activities will concentrate on the following areas: - Developing sustainable energy. The Bank will support through its investments to private sector investors in renewable energy and efficient power production and through policy dialogue, the ongoing reforms of the energy sector including promotion of favourable market conditions for the development of energy efficiency instruments across economic sectors. - Promoting the development of MSMEs. The Bank will continue to increase the availability of risk capital and long term funding to MSMEs, including those engaged in agribusiness, through intermediated financing together with appropriate support to management through its Small Business Support (SBS) programmes, especially in the less developed regions. -Enhancing the competitiveness of Turkish industry. The Bank will seek to support growth and development of the enterprise sector through direct lending and investment operations with domestic and foreign investors in a broad range of industrial and service sectors but with a particular focus on supporting agribusiness, energy efficiency investment, innovation and high value-added industries, sectoral value chains and companies operating outside metropolitan areas. -Promoting market approaches toward investment in municipal infrastructure. The Bank will promote reform and support a secure and efficient delivery of vital utility services to the population and enterprises in the regions of Turkey on a non-sovereign basis. -Supporting privatisation. The Bank will support the Turkish government's privatisation programme in the enterprise, financial and infrastructure sectors including through active participation in financing PPP projects. Turkey is presently listed in the FATF's Public Statement as a country with strategic anti-money laundering (AML) and countering the financing of terrorism (CFT) deficiencies. Turkey has recently taken steps towards improving the AML/CFT regime. Further work remains to be done to address identified deficiencies. In this context, the Bank will follow the recommendations of the FATF to consider the risks associated with these deficiencies and will implement enhanced due diligence on all projects involving Turkey based sponsors. The Board of Directors will reassess this issue in line with any FATF developments. In all its operations, and importantly in its policy dialogue with the authorities, the Bank will coordinate closely with other international financial institutions and bilateral donors to achieve maximum impact from its projects. The effectiveness of this Country Strategy in addressing the country's remaining transition challenges will depend crucially on the continued commitment of the Turkish Government to implement market reforms and to further strengthen the business environment. |
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| 20. Turkey's Seven/Eleven |
| BGC Partners |
| May 3, 2012 Annual CPI inflation increased further above 11%, which is the highest level since Lehman collapse Monthly consumer price inflation came in at +1.52% in April compared to market consensus and our estimate of +1.3%. Main reason behind the higher than expected CPI inflation was larger than expected clothing price increases, smaller than expected decline in food prices, and electricity & natural gas price adjustments. On the other hand, monthly PPI inflation was +0.08%, which was much better than our forecast of 1.1% and the consensus of 1.2%. With the April inflation figures, annual CPI inflation, which was already at a high level, moved further up from 10.43% in March to 11.14% in April. We should note that annual CPI inflation increased to above 11% from around 7% in seven months. On the PPI front, annual PPI inflation declined further from 8.22% to 7.65%, which appeared to be the only good news about April inflation print. Surprisingly, bad news is that all (nine) core CPI inflation indicators posted an annual increase in April, which requires attention and action, in our view. Annual CPI inflation will plunge in May, but will pick up again in June... Thanks to the very favourable base in May, recent price cuts in domestic gasoline and relatively stable TL annual CPI inflation will plunge from 11% towards 9% in May. But we think that this should not comfort CBT, since annual CPI inflation will come back to double-digit territory again in June because of unfavourable base this time. We still believe that biggest problem on the inflation front is the second round effects of rising headline inflation and as long as inflation remains at double-digit, it might be problematic to contain second round effects. While we expect the CBT to insist on the current monetary policy, we continue to forecast that annual CPI inflation will be 8.4% in end-2012 (with risks to upside) against the CBT's inflation target of 5.0% and forecast of 6.5%. Market consensus stands at around 7.5%. In fact, if the Government is keen on introducing health tax on tobacco, which might add 1.2 pps to annual CPI inflation, the likelihood of having a single-digit year-end CPI inflation in 2012 will diminish significantly, according to our projection. All core CPI indicators posted an annual increase in April When we look at the trend in core CPI inflation indices, we see that all (nine) core CPI inflation indices posted an annual increase in April after declining slightly in annual terms in the last two months. The CBT's favourite core CPI inflation "I" moved back from 7.91% to 8.24% on an annual basis, which is the second highest level in the last 59 months. Furthermore, the average annual core CPI inflation (average of the nine core CPI inflation indices) also increased from 9.27% to 9.67%. We also follow the 3-month rolling annualized core CPI inflation (CPI excluding energy, food, liquor & tobacco, gold) as a momentum indicator. The 3-month rolling annualized core CPI inflation started to pick up and runs at around 8.5% now. We can blame higher than expected clothing price increases, but we think that this increase requires attention. Monthly PPI inflation was much better than expected Monthly PPI inflation was much better than expectations. Annual PPI inflation declined further to 7.7% and is encouraging for the future course of CPI inflation. However, price changes in the manufacturing sector were negative in 6 sub-sectors out of 22 in April, which used to be a lot higher during the disinflationary periods. |
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| 21. Monetary policy will be the main driver of Turkey's macroeconomic performance |
| Erste |
| May 4, 2012 The market is likely to trade sideways into slightly negative territory in the first part of 2Q12, mainly on the back of ongoing sovereign concerns and negative implications of capital inflow to Turkey, plus the US soft patch and the CBT's recent hawkish statements. We maintain our positive stance on 2H12 market performance and consider short-term weaknesses as buying opportunities. We still view Turkey as a relative outperformer in the region. Macro developments: The central bank's monetary policy amidst surrounding uncertainty over global financial developments will be the main driver of Turkey's macroeconomic performance throughout the year. We expect developments over sovereign debt concerns in peripheral Europe to prevent the CBT from pursuing a dovish stance up until the final quarter of the year. So far, so good: Turkey, which negatively deviated from its peers in 2011, has been one of the leading markets YTD. The earlier than expected rally as a consequence of rising risk appetite broadly stabilized in last month's sideways trading. Slight correction is likely though: Ongoing sovereign concerns and possible adverse implications for capital inflows to Turkey may trigger the continuation of a sideways trend into slightly negative territory in the short run. US soft patch scenarios and surrounding geopolitical risks near Turkey are other external risks factors. On the domestic front, the CBT stands to opt for additional tightening more frequently, which is not a favorable move for the ISE. Consequently, we think that the current environment is becoming more suitable for a correction in the short run. We should note that the magnitude of that correction is likely to be limited due to current global liquidity conditions, which will prevent the market from a material correction. Maintaining positive stance: Despite our short-term concerns, we maintain our positive stance on the market's 2H12 performance. Our expectations of (i) a prevailing low cost of funding (i.e. global low interest rate environment in the US and Europe enabling cash inflow to emerging markets) (ii) improvement in sentiment and (iii) easing concerns on oil prices following declining geopolitical risks as a result of political moves will be main supporting factors for our positive stance. On the other hand, Turkey's fiscal strength, coupled with the government's recent policy measures and likely less tightened monetary policy in the second half of the year, will help the valuation of Turkish stocks (i.e. ISE is still below its end-2010 levels, despite a 3% YTD outperformance). In a nutshell, we argue that weaknesses in the short term should be utilized as a buying opportunity to benefit from our recovery forecast for 2H12. 1Q12 preview: Our forecasts for banks' 1Q12 earnings translate into a 10% y/y contraction, while we expect industrials' EBITDA and bottom-line to grow by 5% y/y and 51% y/y, respectively. Stock Ideas: Our most recommended stocks are Emlak Konut, Halkbank, Migros, TAV Airports Holding, Tofas, Turcas, and Turkcell. |
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| 22. Turkey, Georgia plan to increase trade |
| bne |
| May 4, 2012 On May 2, Turkey's Minister of Transportation, Maritime Affairs and Communications, Binali Yildirim, and the Georgian Minister of Economy and Sustainable Development, Vera Kobalia, met in Leipzig, Germany to discuss how to increase bilateral trade, Turkish Weekly reported The topics of discussion were the increasing figures in bilateral trade and the steps to be taken so that transportation between Turkey and Georgia will not be affected negatively, said Yildirim to the press after the meeting. "We had a chance to talk about the Kars-Tbilisi-Baku railway. We will have a meeting with our Azerbaijani and Georgian counterparts in Azerbaijan next month and talk on completing the railway project," Yildirim stressed. Minister Kobalia, in her part, called the relationship between the two countries excellent. "Turkey is our number one trade partner. We discussed with Yildirim ways to send more goods to Europe via Georgia and Turkey," Kobalia said. Turkey and Georgia signed a free trade agreement on 21 November 2007. The trade volume between the countries went up by 33% in 2011 compared to 2010 and stood at around $1.4bn, according to Turkey's Ministry of Economy data. |
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| 23. Turkish real estate: Law on real estate sales to foreigners approved by Parliament |
| Erste |
| May 4, 2012 The law enabling sales of real estate property to foreigners without the reciprocity principle was approved by parliamentary vote yesterday. The law will allow sales of real estate property (including farm land) to foreigners without the reciprocity principle being applied. It also increases the limit of land sales to a foreigner countrywide from 2.5 hectares to 30 hectares. The cabinet could increase the limit to 60 hectares. According to the law, the total area of properties held by foreigners cannot exceed 10% of the total area in a district. Previously, non-resident individuals and foreign companies were able to buy real estate in Turkey based on the principal of reciprocity. According to the reciprocity principle, a foreigner could buy real estate in Turkey where Turkish citizens enjoy the same rights in the foreigner's country. Following termination of the reciprocity principle, foreign demand is expected to boom, thanks mostly to demand from Russia, the Turkic Republics and the Gulf region. We expect foreign investors' residential demand in Turkey to rise following the approval of the law for (i) branded and well-located residential projects in Istanbul and (ii) residential projects in coastal areas of Turkey (especially on the Mediterranean and Aegean coasts). As office buildings can already be leased to foreign institutions, the law should not have a significant impact on this segment. We think that the facilitating of real estate sales to foreigners should be positive for residential developer REITs in particular, especially Sinpas REIT, Kiler REIT, Emlak Konut REIT and Torunlar REIT. In addition to its high level residential projects in Istanbul (Bosphorus and Istanbul Saraylari projects), Sinpas REIT plans to launch a mixed-used project including a hotel, villas and residential units in Marmaris (southern Turkey) this year, targeting foreign investors with the residential component. Kiler REIT has 75 residential units at its prestigious Sapphire project in the center of Istanbul, and thus could prove attractive to foreigners too. Meanwhile, Emlak Konut REIT is expected to be a beneficiary of rising foreign housing demand. The relaxing of sales to foreigners could also increase residential unit sales at two well-located projects of Torunlar REIT in Istanbul. |
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| 24. Sizeable outflows from the bond & equity markets last week in Turkey |
| BGC Partners |
| May 3, 2012 1- EQUITY: In April 24-27, foreigners were net sellers of US$139 mn (m-t-d net inflows were US$202 mn). In March foreigners were net sellers of US$27 mn, while they were net buyers of US$283 mn in February. Since the beginning of the year foreigners were net BUYERS worth of US$749 mn in the equity market. 2- BONDS: The CBT data showed that foreign investors were net sellers of US$321 mn in that week. M-t-d net inflows into the bond market were +US$313 mn. Since the beginning of the year foreign investors turned to net BUYERS of US$708 mn in the bond market. 3- FX MARKET: TL appreciated by 1.5% in that week against the equally weighted exchange basket despite foreign sell-off in financial markets. We still think that cross-currency deals, options, structured products, repo transactions, custody definition problems and switches from fixed income to money market by foreigners complicate to form a relationship between the foreign flows & currency. Meanwhile, while since the beginning of the year we observe that locals bought FX by around US$6.9 bn. 4- FX RESERVES: CBT's gross FX reserves declined very slightly to US$80.2 bn from US$80.3 bn (excluding gold worth of US$12.8 bn) as of April 27. TO SUM: On a 52-week rolling basis, net foreign inflows in the equity market declined further to US$44 mn from US$131 mn one week ago (its peak was +US$2.6 bn in May 2011), while 52-week rolling net foreign inflows in the bond market increased from US$3.67 bn to US$3.69 bn (peak was US$18.5 bn in end-April 2011). |
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| 25. Bosch denies plans to build factory in Sincan, Turkey |
| Balkans.com |
| May 4, 2012 Following yesterday's news that Bosch was planning a large investment in the Sincan Organized Industrial Zone in Ankara for a spare auto parts plant, the company has announced that it has no such plans, Hurriyet Daily reports. "The news that Bosch is going to open a spare auto parts production plant in Turkey does not reflect the reality and no decisions have been made to invest in a facility in Sincan Ankara," read a statement released by Bosch. |
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| 26. Net profit on Turkish Garanti Group Romania jumped 80% in Q1 |
| Balkans.com |
| May 4, 2012 Net profit on Turkish Garanti Group Romania, which includes 3 financial institutions and a bank, jumped 80 percent to EUR 5.8 million in Q1. The largest share came form Garanti Bank, where the net profit gained 70 percent y/y to EUR 4.1 million. Garanti Bank will focus this year in increasing lending both for retail and the SME/corporate sector, in the same time looking to improve liquidity, according to Murat Atay, CEO Garanti Group Romania. The bank's overall lending grew by at an average of 10 percent. We will continue to remain profitable at a group level this year, taking a cautious approach on the economic situation and carefully manage risks in an environment that remains volatile, says Atay. Garanti Bank had a network of 79 units and 216 smart ATMs across Romania. Meanwhile the number POS rose to 7,400, while the lender's debit and credit cards exceeded 230,000. Turkyie Garanti Bankasi, shareholder in Garanti Group, reported a net profit of EUR 410 million and assets of EUR 70.6 billion in Q1. Garanti Group Romania includes three non-banking financial institutions (Garanti Leasing, Garanti Consumption Loans, Garanti Mortgage Loans) and a bank, with consolidated assets of EUR 1.8 billion. The group has over 450,000 clients in Romania. |
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| 27. Turkish Is REIT reported TRY 16.0mn net profit for 1Q12 |
| Erste |
| May 4, 2012 Is REIT reported TRY 16.0mn net profit for 1Q12 (1Q11: TRY 9.8mn, 4Q11: TRY 36.7mn), in line with the consensus estimate of TRY 15.2mn. Revenues increased 18% y/y to TRY 31.7mn (consensus: TRY 33.8mn) in 1Q12. Is REIT generated TRY 23.8mn in rental income (75% of total revenues) and TRY 5.6mn in revenues from service charges. The company's rental income and service charge revenues increased 13% y/y and 41% y/y, respectively, in 1Q12. The company's EBITDA was TRY 21.5mn in 1Q12, also very much in line with the consensus estimate of TRY 21.4mn. However, the company recorded net TRY1.2mn one- off reversals of previously reported provisions (based on investment properties), which are recorded in the COGS account. If we exclude one-off provision-related items, EBITDA increased 8% y/y to TRY 20.3mn. The adjusted EBITDA margin declined 6pp y/y to 64% in 1Q12. |
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| 28. Norges Bank increases its stake to above 5%, says Turkish Bizim Toptan |
| Erste |
| May 4, 2012 Norges Bank announced that the company's stake in Bizim Toptan increased to 5.01%. If a shareholder's stake in a listed company passes 5%, the public has to be informed. Currently, 49.94% of Bizim Toptan is owned by Yildiz Holding and Norges Bank became the second largest shareholder that has more than a 5% stake in the company. |
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