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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. BOSPORUS BLOG: Too much of the same in Cyprus |
| bne |
| May 15, 2012 It is said that life rarely changes on a small island - and so it is with the divided island of Cyprus. Greek Cypriots are preparing for a six-month stint holding the EU's rotating presidency, which is likely to put the already deadlocked negotiations with the northern Turkish half further into deep freeze. The world is asking: when will some movement come to this frozen conflict? Not anytime soon, reckons Dr Ahmet Sozen of the Cyprus Policy Centre in Turkish North Cyprus. The last time the Cypriots neared a settlement was in 2004, with the so-called "Annan Plan" that aimed to create a federation of two states to reunite the island. Greek Cypriots ended up rejecting the plan when it went to referendum after numerous revisions; an outcome that senior international diplomats claimed was a surprise. Today, 68% of Greek Cypriots and 65% of Turkish Cypriots desire that the current negotiations lead to a settlement, according to Sozen, who conducted a bi-communal survey as part of an initiative called "Cyprus 2015". But while the desire for settlement is there, reaching it is still far off, with 65% of Greek Cypriots and 69% of Turkish Cypriots not believing the current talks will lead to a settlement. And, unfortunately, they appear to be correct. A push by UN chief Ban Ki-moon to reach a new stage in negotiations by the time the Greek Cypriots assume the EU presidency on July 1 has failed. In April, plans for an international conference on the Cyprus issue were scrapped, with Ban saying that the two sides had failed to make progress on proposals to become a federal power-sharing state. Click to read more |
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| 2. Is there enough juice left in the long-end of the curve in Turkey? |
| Citi |
| May 15, 2012 Standing at 9.15%, the 10-year bond yield has shrugged off the lira weakening and a rise in global risk aversion, moving closer to its most recent cyclical trough in September 2011 (8.82%). The 2-year benchmark paper, however, is at 9.51%, which is about 10bp higher than last Friday. These developments have led to further inversion of the yield curve, which seems to be an anomaly among its peers (Figures 38-39). In our view, the observed strength of the long-end of the yield curve is supported by the following factors: (i) an increase in the CBT's perceived hawkishness; (ii) the CBT's continued support for the lira; (iii) a fairly light redemption schedule until August; and (iv) foreign investors' dominance of the long-end of the curve. The decline in the 10-year bond yield deserves a closer look for several reasons. First, at 11.1%YoY, the April inflation reading came in higher than expected, with core inflation surging to 8.2%YoY. Second, following the rise in the 2-year bond yield to 9.51% from 9.44% last Friday, Turkey's yield curve has inverted further, which is hard to justify when compared with its peers. Finally, our 10-yr asset swap spread model (Figures 32 through 37) suggests that, at around 200bps, 10-yr asset-swaps spreads are now fairly priced compared to before, which makes it harder to justify further rally in the long-end of the yield curve. A further decline in the 10-year bond yield would require a drop in the 10-year breakeven inflation (5.6%) and/or a fall in the real yields (3.3%). Based on our inflation forecast trajectory, our analysis suggests that a breakeven inflation of about 5.7% is reasonable. Our analysis also indicates that a meaningful decline in the real yields is not very likely given Turkey's fundamentals. Where do we go from here? In our view, favourable technicals and positioning may lead to further limited decline in the 10-year bond yield as much as 30bp. However, the fact that fundamentals are not supportive of such a move raises the risk of a sharp reversal in the event of an adverse shocknot to mention the risk of the CBT softening its stance. |
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| 3. Turkish firms should buy European firms, urged Caglayan |
| bne |
| May 15, 2012 According to Economy Minister Zafer Caglayan, Turkish government would like to see Turkish firms buying leading European firms that are facing closure, the Anatolian News Agency reports. European Commission's report issued last year shows that some 1.6m businesses face closure in next 10 years, Caglayan said on May 13, speaking on a television program. Nearly 600,000 of the struggling firms are located in France and Germany, he added. Caglayan reminded the audience that acquiring European companies also means acquiring their distribution networks and exports channels. The Economy Ministry grants financial support up to $200,000 to Turkish companies that acquire European firms, he added. According to the minister, one of the main reasons these firms face closure is that there is no second generation to take over businesses. He said that the Prime minister Recep Tayyip Erdogan's call for three children per family is designed to maintain the advantage of having a young population. "If it is not met, at our current pace we will become what Europe is now [in terms of demographics] by 2030," he said. |
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| 4. Turkey's economy at a critical juncture, says IMF chief |
| bne |
| May 15, 2012 According to IMF chief Christine Lagarde, Turkey's economy is at a critical point and the growth is projected to decelerate this year. Turkey needs to give "special attention" to narrowing down the wide current account gap and to lowering down inflation, she also said. This could be done by deceleration, she added in a written statement after meeting with the country's leaders on May 11. "The IMF agrees with the authorities that it is important now to focus more on increasing domestic savings to reduce the vulnerabilities that can come from short-term capital inflows," Lagarde said. "The IMF agrees with the authorities that it is important now to focus more on increasing domestic savings to reduce the vulnerabilities that can come from short-term capital inflows. In that context, I welcome the government's recent initiatives to increase private savings, including through the reform of private pensions," she added. Lagarde attended the Investment Advisory Council meeting in Istanbul on 11 May where Turkish Prime Minister Recep Tayyip Erdogan lashed out again at the rating agency Standard and Poor's, which revised downward the outlook of the Turkish economy on May 1. According to Deputy Prime Minister Economy Minister Zafer Caglayan, Lagarde had told him that Standard and Poor's should have apologized to Turkey, Anatolian News Agency reported. "We do not expect [any apology from the rating agency]," he said. "[Lagarde] told me that 'Turkey does not need the IMF, but the IMF does need Turkey,' he added. |
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| 5. A gateway to European statistics |
| Eurostat |
| May 15, 2012 What share of those aged 18 to 24 left school early and what proportion of young people in the EU have completed at least upper secondary education? How much do households in the EU spend on food and on housing and clothing? How many mobile phone subscriptions are there per inhabitant and how many text messages are sent per person? The answers to these questions and many more can be found in the 16th edition of the Eurostat yearbook1, published by Eurostat, the statistical office of the European Union. The Eurostat yearbook is available as a regularly updated electronic publication on the Eurostat website. Europe in figures - Eurostat yearbook 2012 presents a comprehensive selection of the statistical data available at Eurostat, together with explanatory text. The yearbook is an introduction to European statistics and provides guidance on the vast range of data freely available from the Eurostat website2 and its online databases. The yearbook shows how key indicators have developed in the EU27, the euro area and the Member States. Data for the EFTA countries, the Candidate countries, the US and Japan are also included when available. The 2012 yearbook has thirteen chapters on different statistical areas: economy and finance; population; health; education and training; labour market; living conditions and social protection; industry, trade and services; agriculture, forestry and fisheries; international trade; transport; environment; energy; and science and technology. This release presents a small selection of the statistics presented in the yearbook. Highest proportion of early leavers from education found in Malta, Portugal and Spain Early leavers from education and training are defined as persons aged 18 to 24 who have completed at most lower secondary education and who have not received any education or training in the last four weeks. The Europe 2020 strategy and the strategic framework for European cooperation in education and training3 have set a target of 10% for 2020 for this indicator. In 2010, the percentage was 14% on average in the EU27, and varied among the Member States, from 5% in Slovakia, the Czech Republic, Slovenia and Poland to 37% in Malta, 29% in Portugal and 28% in Spain. In the EU27, the proportion was 12% for women and 16% for men, with higher shares for men in all Member States, except Bulgaria and Slovakia. Data on educational attainment show that 79% of those aged 20 to 24 in the EU27 had completed at least upper secondary education in 2010. The percentages varied among the Member States from 53% in Malta, 59% in Portugal, 61% in Spain and 68% in Denmark to 93% in Slovakia, 92% in the Czech Republic and 91% in Poland. On average in the EU27, 82% of women and 76% of men had completed at least upper secondary education in 2010. The percentage for women was higher than for men in all Member States except Bulgaria and Slovakia. The age of students in tertiary education depends on many factors: whether they postpone starting tertiary education either by choice (e.g. by taking a gap year between secondary and tertiary education) or obligation (e.g. for military service), the length of the courses studied and the extent to which mature students return to education later in life. The median age in tertiary education was 22.1 in the EU27 in 2009, with the highest median ages observed in Sweden (25.3), Denmark (25.2), Finland (24.5) and Austria (23.8), and the lowest in Ireland (20.2), France (20.5), Belgium and Malta (both 20.7). Almost a quarter of household consumption expenditure on housing Consumption can be divided into different categories of goods and services. In the table below, the most important categories are presented, covering almost 80% of total final consumption expenditure of households in the EU27. In a large majority of Member States, housing accounted for the largest share of final consumption expenditure of households in 2010. The exceptions were Lithuania, Malta, Portugal and Romania, where food had the highest share. For housing, the shares varied from 12% in Malta, 15% in Lithuania and 16% in Portugal to 30% in Denmark and 27% in Finland, the Czech Republic and Sweden, compared with an EU27 average of 24%. It is interesting to note that on an EU level, transport accounted for the same share as food (13%). For food, the proportions ranged from 9% in Luxembourg and the United Kingdom to 29% in Romania and 26% in Lithuania. For restaurants and hotels, the shares varied from 3% in Lithuania and Poland to 17% in Spain, while for clothing and footwear, the proportions ranged from 3% in Hungary and the Czech Republic to 8% in Italy and Lithuania. |
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| 6. Growth slowing, external risks rising in EM |
| TEB |
| May 15, 2012 Data across emerging markets show growth slowing. With external risks rising, not least as a result of the political crisis in Greece, an improvement in sentiment is dependent on a reduction of political uncertainty in the eurozone. Investors have scaled back on risk positions, moving defensively into govvies with bull flattening in tow and EM currencies weakening. Next week's data set, including GDP and industrial production data for Latam, GDP for CEEMEA and Russia and the WPI for India, should lean towards central banks holding rates steady. On Wednesday, the NBP hiked rates by 25bp, matching our call but surprising many investors. We expect a further 25bp hike in Q3. Despite the headwinds blowing from Europe, we perceive the recent sell-off in CEEMEA to be overdone and favour buying HGB 15/C, the cheapest bond on the curve. We expect the POLGB curve to flatten further. India is the country to watch in Asia in the coming week. A softer-than-expected WPI print could see the markets price in another rate cut. We stay with a 2y OIS receiver. Malaysia benefits from strong external balances, which, coupled with a potential USD 3bn inflow from an upcoming IPO, keep the MYR strong. In Latam, we are long the CLP which we expect to outperform the BRL and MXN. In view of the heightened external uncertainties, we have revised up our USDMXN forecasts, although we continue to expect the currency pair to trend down. We recommend receiving BRL rates, especially up to the 2y tenor in both IPCA swaps and PrexDI. The Columbian yield curve is too steep in our view. |
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| 7. How realistic are fiscal targets in CEE? |
| Erste |
| May 15, 2012 Concerns surrounding the Greek post-election deadlock and threat of Greece not being able to cooperate with the IMF increased the risk aversion this week. CDS increased 20-30bp w/w for CEE countries (although the Czech Republic's remained unchanged), while currencies eased about 1.5% w/w. The most volatile pair EURHUF rose above 290 for a while, while the 10-year bond yield again stands above 8%. The Slovak auction of 10-year benchmark bonds denominated in USD ended successfully; out of the demanded USD 3bn, the debt agency placed a planned volume of USD 1.5bn at a spread 262.2bp over corresponding US Treasuries. The debt agency is now in a comfortable situation should market conditions deteriorate and it does not plan to approach markets with FX-denominated issues anymore this year. On Wednesday, the Polish central bank surprised the market and raised the key interest rate by 25bp - too late, in our view. The global environment and the short-term indicators point to a moderation of the growth. As for future developments, we do not believe that this is the beginning of a tightening cycle (but one more rate hike cannot be ruled out). In the Czech Republic, the data confirmed the ongoing weakness of the economy and raised the probability of a CNB cut in 2H12, especially if the government proceeds with the planned fiscal restriction. Further monetary easing is also likely in Romania, but not through a reduction of the key rate. The NBR governor said that the central bank is considering a cut in RON minimum reserve requirements. A 5pp cut (from 15% to 10%) would release RON 6bn onto the market, but the NBR does not rule out a smaller cut in minimum reserve requirements. Next week, the flash GDP for 1Q12 will be the most important release. We expect the Romanian and Czech economies to have contracted 0.2% q/q s.a. in the first quarter. For the Hungarian economy, we forecast a deeper contraction of 1.6% q/q s.a., resulting in -0.5% y/y. How realistic is the fiscal target outlined in the convergence/stability program for 2012? In Turkey: The current account deficit in March stood at USD 6.1bn, in line with the market consensus and lower than our expectation of USD 6.5bn. The 12- month rolling deficit sharply declined to USD 71.8bn (9.2% of GDP), from USD 75.2bn (9.6% of GDP). The financing side, on the other hand, continues to deteriorate, with total inflows declining to USD 53.7bn from USD 59.7bn. Portfolio inflows to the bond market, and net errors and omissions of USD 3bn and USD 2.2bn were the main contributors on a monthly basis. The good news was that corporates acquired USD 1bn long- term borrowing from international markets. Capital inflows, combined with net errors and omissions, add up to USD 66.8bn on 12-month rolling basis, thus leading to a USD 5bn reserve used to cover the USD 71.8bn current account deficit. We expect the current account deficit to further improve in coming months, although gradually, while we find it too early to revise it to the downside due to falling oil prices. We currently expect the current account deficit to end the year at 8.5% of GDP. Industrial production in March posted 2.4% growth over last year, thus staying above the market consensus of around 2% and our expectation of - 2.5%. Seasonally-adjusted production was up 0.7% m/m, confirming the relatively strong standing on top of the previous month's 0.7% level. Production growth in the first quarter of the year declined to 2.75% over last year, from the 6.5% recorded in the last quarter of the year. The outcome is wholly in line with the expected slowdown in economic activity in the first quarter of the year. Indeed, the moderate growth level is likely to continue over the next couple of months, mainly due to the lagged impact of the CBT's tighter monetary policy in response to rising inflation. That said, we expect it to recover in the second half of the year, thanks to an expected easing of inflation, and thus monetary conditions, and to end the year in line with our GDP growth estimate of 3.5%. |
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| 8. Belarus ready to start sale of state-run banks |
| bne |
| May 15, 2012 Belarus is ready to embark on the process of selling the country's state-run banks, starting with Paritetbank, the smallest of the four state-owned lenders, the governor of the National Bank of the Republic of Belarus, Nadezhda Ermakova, tells bne. The deal could be the first of several in the country's banking sector over the next year. VTB (Belarus), the subsidiary of Russia's VTB Bank, wants to buy the 25.9% interest that the Belarusian state currently owns in the lender through state oil and chemistry concern Belneftekhim. Belarus' central bank has also suggested that Russia's VTB Bank sell its Belarus' subsidiary, Moscow-Minsk Bank, to the Belarusian government so it can then merge it with state-owned Belinvestbank to beef up the institution. Ermakova says that Paritetbank, a medium-sized bank on the list of Belarus 32 banks, will be sold in a tender. "The tender will be held in the middle of 2012 or during the second half of the year," she says. Ermakova says several contenders have already having expressed an interest in buying Paritetbank, with one of them being Poland's Getin Holding, which bought Belarusian Sombelbank in 2008. "We received a letter from the holding [Getin], in which it expresses its interest in acquiring Paritetbank and says that it is ready to make its bid in the tender," she says. Click to read more |
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| 9. Unions kick up a fuss in Poland |
| bne |
| May 15, 2012 Union membership may be on the wane in Poland, once famed for its Solidarity trade union federation that was instrumental in the toppling of communism. But this summer's Euro 2012 football championships are providing a useful backdrop for labour protests against the government's attempt to restructure the pension system and other reforms. Among the disgruntled are cab drivers, upset by new regulations that no longer require examinations to get a taxi license, who are planning to block the roads to the brand-new National Stadium where the opening ceremony will be held June 8; road construction companies owed money are preparing to block access roads to Warsaw; and custom officers seeking wage hikes are threatening tough inspections of the tens of thousands of incoming football fans, or even blockades at the borders. On top of that, Piotr Duda, the clever new leader of the 700,000-strong Solidarity union, has mapped out protests and a modern propaganda campaign in the media that could undermine the government without provoking it to use violence. Click to read more |
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| 10. Freed Turkish journalists tell of captivity in Syria |
| Hurriyet Daily News |
| May 15, 2012 Two Turkish journalists who went missing while reporting on the uprising in Syria two months ago were released on Saturday with the help of Iran, Foreign Minister Ahmet Davutoglu has said. After two months in detention, Adem Ozkose, 34, and Hamit Coskun, 21, took a plane from Tehran that landed early May 13 in Istanbul, where they were greeted by friends and relatives. Click to read more |
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| 11. Turkish columnist fired via Twitter over his tweets |
| Hurriyet Daily News |
| May 15, 2012 Columnist Ergun Babahan was fired from his post at English daily Today's Zaman via a twitter message by the paper's editor-in-chief, over a number of tweets he posted yesterday. Babahan, a supporter of Fenerbahce football club, posted controversial tweets after his team lost the Super League title to arch-rival Galatasaray on Fenerbahce's home field. Fenerbahce fans invaded the pitch and clashed with the police after the game ended. The clashes had continued outside the stadium, where police officers had to detain hooligans at gunpoint. Click to read more |
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| 12. Turkish student sentenced to 11 years in poshu scarf case |
| Hurriyet Daily News |
| May 15, 2012 A Turkish court sentenced Cihan Kirmizigul, a university student who was arrested in 2010 for wearing a "posh" scarf near a grocery store that was attacked by unidentified individuals wearing the same garment, to 11 years 3 months in jail, daily Hurriyet reported. Click to read more |
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| 13. Major Deadlines in Iraq and Iran for Turkey |
| GlobalSoure Partners |
| May 15, 2012 By red-listing former deputy PM and recent fugitive Hashimi with Interpol, the Maliki government raised the pressure on Ankara. Ankara has no intention to return Hashimi and is therefore now formally a party to the sectarian tensions in its neighbor. Yet, Maliki's uncompromising attitude on prosecuting Hashimi also illustrates to Sunnis and the Kurds that his government is a menace to non-Shia groups. The representatives of these two ethnic groups, along with the Sadr faction presented Maliki with an ultimatum at the end of April. Either he reconsiders his authoritarian policies and steps back, or he'll be toppled in parliament. The deadline of the ultimatum is believed to be 15th of May. To the best of our knowledge, Maliki has not taken any steps to appease the opposition. In fact, the red listing of Hashimi could be construed as throwing down the gauntlet. If the opposition get rids of Maliki in favor of a more moderate Shia, we would become more optimistic that the nation can remain united. Otherwise, we would remain mindful of the Syrian war, and the Iran-Turkey- Saudi Arabia power struggle renting the country asunder gradually. In Israel, Netanyahu called off early elections to form a Grand Unity coalition including the main opposition party, Kadima. While this unexpected move has ostensibly many purposes, such as streamlining the electoral system that grants too much power to marginal voter groups, it can also be considered the final warning to Iran. The vast majority backing Netanyahu means that he has the moral authority to order an attack on Iran's nuclear facilities if the P5+1 talks don't pan out. The first clues regarding the outcome of 23 May Iran vs. P5+1 meeting in Baghdad, will be gleaned this week from another summit between Iran and the IAEA. We doubt whether Iran would give the IAEA the right to inspect suspected nuclear facilities, but it could make such a permit conditional upon progress in Baghdad. Our best-case scenario for P5+1 summit is that both sides will resolve to stay at the negotiating table. If talks break down, we would begin earnestly drawing up our scenarios for an Iran versus U.S.-Israel military clash later in the year. |
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| 14. Turkish charter team draws first border |
| Hurriyet Daily News |
| May 15, 2012 A sub-commission of Parliament's Constitution Conciliation Committee agreed last week on 45 titles under the Fundamental Freedoms and Rights chapter of the new constitution, and failed to reach an agreement on 10 titles, including education in native languages, conscientious objection to compulsory military service, Turkish citizenship, and the "protection of generations." The Constitution's Fundamental Rights and Freedoms chapter will have five main sections including 45 titles, which will be finalized by the Committee on May 16, according to information obtained by the Hurriyet Daily News. The five sections in the sub-commission's draft include "Basic Principles," "Individual Rights and Freedoms," "Political Rights and Freedoms," "Social and Economic Rights," and "Limiting Basic Rights and Freedoms." Click to read more |
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| 15. New constitution formula takes shape in Turkey |
| Hurriyet Daily News |
| May 15, 2012 Parliament's Constitutional Reconciliation Commission started writing the new constitution beginning with the section on "fundamental rights and freedoms." The sub-commission is going to incorporate all the suggestions into a single text and present it before the commission for further deliberations on Wednesday. There are shared requests, as well as widely differing suggestions. The Republican People's Party (CHP) and the Peace and Democracy Party (BDP,) for instance, have banded together to provide constitutional protection for people of the "third sex," under a clause entitled "sexual orientation." While the CHP requests "fair trial" along with the ruling Justice and Development Party (AKP,) the BDP and Nationalist Movement Party (MHP) have also come together to issue similar demands in "human rights and the prevention of ill-treatment." Click to read more |
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| 16. Turkey to foster NATO bid for Balkan nations |
| Hurriyet Daily News |
| May 15, 2012 One of the priorities Turkey will bring to the agenda for the NATO Chicago summit is the promotion of Macedonia, Bosnia-Herzegovina and Montenegro, as well as Georgia's bid to join the alliance, as their membership is tied with the peace and stability seen in both the fragile Balkan and Caucasus regions. Though the summit will not focus on, nor make a landmark decision on enlargement, Turkey will still strongly urge allies not to slow this process down but make commitments that the invitations to join the alliance would be offered at the next summit, of course in line with their progress in meeting criteria. Diplomatic sources told the Hurriyet Daily News over the weekend that Turkey will convey the message that "as NATO we should also give the sign that our Open Door Policy is still valid" during the summit. Click to read more |
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| 17. New Fashions in the Old Neighborhood in Turkey |
| GlobalSoure Partners |
| May 15, 2012 "New fashions in the old neighborhood" is a Turkish expression referring to a radical and rather unexpected change of events. AKP's decision to facilitate a public debate on "the presidential system" is one such event that carries the potential to drastically alter the course of Turkish political history. AKP claims that the idea of moving from the current parliamentary system to an executive presidency a'la U.S. or France, is just a suggestion to strengthen the checks and balances in the system, and the party won't insist on it, if the opposition turns it down. Will a presidential system lead to better governance? As usual, AKP is making up arguments as it goes along. AKP's reign is the supreme proof that the parliamentary system can work miracles. Secondly, this is a very poorly veiled attempt to consolidate all power in the hands of Mr. Erdogan when he becomes president, having nothing to do with bolstering the checks and balances. Thirdly, being aging conservatives we firmly belong to the if it isn't broke, don't fix it camp. What Turkey really needs is thorough overhaul of the Political Parties and Electoral Laws and releasing the High Council of Judges and Prosecutors (HCJP) from the pernicious influence of the Ministry of Justice. Can such an article pass the parliament? All the opposition parties already turned down the suggestion. Hence, it won't be in the draft that will be submitted to the parliament, if one can be written in harmony. (We bet it won't be written by the bi-partisan committee). AKP will probably introduce it during the floor debate, at which time it needs at least 4 votes from other parties. We speculate that given the rather loose ethical standards of Turkish deputies, these won't be hard to secure, but it is extremely risky because the constitution is voted upon in secret ballot. If we are correct in our past assertion that PM Erdogan is determined to become the next president of Turkey with executive powers, we would expect political tensions to rise in the coming months, as AKP begins to campaign for the referendum that would ratify such a constitution and pry away deputies from the other parties. The fear of a very divisive constitutional referendum campaign that will mutate into an all out spending and loose monetary policy bonanza in the last quarter of the year remains the backbone of our negative outlook for political risk. Latest TEVAP poll shows only 16% of the electorate support the presidential system, with at least a half of AKP voters being against it. Taking the new constitution with such an article enshrined in it to a public vote risks defeat. Therefore, we admit that our conclusion of Mr. Erdogan being determined to win the coveted award is somewhat forced. Yet, we are intellectually forced into our position, because we can't see the alternative from Mr. Erdogan's perspective: - Erdogan set a very strict 3-term limit on himself and all deputies. This is his third term; will he break his own wow? - President Gul is not eligible to run for president a second time, if Erdogan remains PM, what will happen to Gul's political career? - How will Erdogan get along with the next president? Since the person can be reelected for a second 5-year term, he could well build his own constituency and emerge as a rival to him. A weak candidate that will be beholden to Erdogan risks losing the popular vote. |
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| 18. CAD Adjustment Underway, CAP Has Yet to Improve in Turkey |
| GlobalSoure Partners |
| May 15, 2012 The CAD did not surprise in March, coming in at $6.1 billion, and taking the 12-month rolling deficit sharply lower to $71.8 billion, from $75.3 billion a month earlier. The drop in non-energy deficit is even larger, which now stands at a little below $22 billion, from $26.4 billion a month earlier (see table; graph). Our conjecture on CAD remains the same: the best of adjustment is probably behind us, and after narrowing further through the summer months, helped by base effects, the CAD should end the year at some $65 billion a still elevated level in the current global environment. The capital inflows were about the same magnitude as with the CAD, driven by portfolio (debt) inflows ($3 billion, of which $2.2 is into the domestic market) and deposit inflows into the Turkish banking sector ($1.5 billion). There is no better indication than these, in our view, that CAD financing is still coming in mostly in the form of so-called 'hot money', enticed in part by the Bank's monetary policyquite an irony, in our view. Moreover, the puzzling presence of unidentified inflows in BOP financing (errors and omissions) persists, with some $2.2 billion in the month, and at around $13 billion in 12-month rolling terms. An interesting feature of capital (or financial) account developments in recent months is the weakness in 'identified' inflows, compared with the CAD levels. True, the latter is narrowing, having been reduced to below $72 billion as noted above, but the 12-month cumulative inflows through identified' sources were around $53-$54 billion in March (see first graph below), with the shortfall, by definition, being met from CBT reserves and errors and omissions. Further, the strong inverse correlation between the movements in CBT and commercial bank reserves continues. This suggests to us that some of the increase in CBT reserves, in effect, is thanks to borrowed funds from commercial banks, which, in turn, is most likely being secured through short-term facilities, like swaps. What makes all this interesting is that until we have a more comfortable financial inflow picture, i.e. until external financing pressures are lastingly relieved, the Bank's hands will be tied in terms of its monetary policy choices, i.e. it will continue to keep funding rates high and remain focused on inflation' (read: the exchange rate). Put differently, experience suggests that for the CBT to take control of its monetary policy, and start playing with various parameters to its liking, the blue line (in the first graph below) should start faring above the red line. |
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| 19. Growth in Turkey: So far ss predicted, but |
| GlobalSoure Partners |
| May 15, 2012 Industrial production expanded in line with expectations in March (2.4%), which yielded a y/y growth of 2.8% in Q1 as a whole. In seasonally-adjusted terms, IP shrank, which means, given history, GDP growth was flat to slightly negative, q/q, and in low single digits, y/y. Meanwhile, the CNBC-e's consumption index, properly smoothed, suggests a relative pick up in consumption through April, which is also consistent with the script: a gradual pick-up in growth after a pause in Q1. Then again, the Bank's effective funding rate -- historical data on which has begun to be published in the Bank's website with one day lag (Friday is our estimate) -- has been hovering over 10% lately. Should it stay at these levels for the foreseeable future, the growth script may have to change |
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| 20. Long-lasting Deficit, Short-term Financing in Turkey |
| TEB |
| May 15, 2012 At USD 6.1bn, March's current account deficit was in line with our expectation and market consensus Consequently, 12-month cumulative current account deficit declined to USD 71.8bn from USD 75.2bn in February. 12-month cumulative non-energy current account deficit also decreased to USD 22.1bn from USD 26.2bn. The main financing items were private sector borrowing, unidentified inflows and deposit flows Private sector's debt rollover ratio remained high at 127% in March. Inflows to TRY denominated bonds and unidentified inflows were both USD 2.2bn. Non-residents increased their deposits held in local banks by USD 1.5bn. In March, the CBRT's reserves increased by USD 2.2bn, mainly on the back of the Treasury's samurai bond issuance amounting JPY 90bn and the increase in banks' FX reserve requirement holdings of USD 1.4bn, which was financed by the drawdown of private sector's deposits abroad (USD 1.5bn). The adjustment in the current account balance is likely to lose pace in the coming months We expect 12-month cumulative current account deficit to continue to narrow in Q2, albeit at a more gradual pace. The adjustment is likely to stall in the second half of the year as the base effects wear off. Should Brent remain at its current level of around USD 110/bbl, current account deficit could decline to around 8% of GDP by end-2012. The CBRT extended its "extraordinary days" strategy Despite a tighter monetary policy and the market-friendly current account deficit data, TRY was among the weakest performers among the EM currencies last week. Today is the 6th consecutive day of the extraordinary day policy of the CBRT and the weighted cost of funding increased to 10.7%. In the absence of a recovery in TRY, the bank could further extend its extraordinary day strategy. Since 22 March, there were 17 "extraordinary days" versus 18 "normal days". Against this backdrop, the CBRT recently started to announce its weighted average cost of funding officially, which could be perceived as the acceptance of a "new policy rate" by the officials. |
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| 21. Leather industry hurt by dwindling supplies in Turkey |
| Click to read more |
| May 15, 2012 A lack of leather supplies is one of the pressing problems facing global leather producers today, said Yucel Yilmaz Executive Board Director of Kuzu, one of Turkey's leading leather jacket producers, in an interview with Hurriyet Daily News. "When leather exports first started booming in the 1960s, there were 500,000 sheep and goats, but although the global population has risen significantly since then, the numbers of sheep and goats still remains the same," said Yilmaz. As demand for leather increases, so too do the prices as a wide range of sectors are dependent on leather, including the automotive and furniture sectors. Luxury auto producers have begun to make leather seats optional features for customers who are willing to pay more for it, according to Yilmaz. Click to read more |
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| 22. Turkish Akcansa 1Q12 financial results |
| Erste |
| May 15, 2012 Akcansa posted a TRY 15.0mn net profit in 1Q12, which is below our estimate of TRY 21.1mn and the consensus of TRY 18.0mn. The deviation between our estimates and the actual figures stemmed mainly from margins lower than our estimates in ready mixed- concrete sales plus higher financial expenses. The gross and EBITDA margins declined to 15.9% and 16.9% in 1Q12 from 19.1% and 19.7% in 4Q11, respectively, which was below our 18.5% and 19.6% estimates. Meanwhile, the company increased its sales by 4.4% to TRY 218.9mn y/y in 1Q12, which is in line with our estimate of TRY 218.1mn and the market estimate of TRY 217.9mn. We still favour the company's operating regions in Turkey, as well as its export exposure to Russia, which brings price advantage. As a result of this, the company increased its sales YoY, despite bad weather conditions in 1Q. According to Turkish Cement Manufacturers' Association figures, domestic sales decreased by 25% in the January-February period, and we expect a 10% contraction in domestic sales in 1Q12 backed by a strong recovery in March on better weather conditions. Meanwhile, we maintain our 5% growth expansion estimate for cement sales in 2012. On the margin front meanwhile, we may see better pricing both in cement and ready mixed concrete in 2Q12, but we expect the latest electricity price hike to bring pressure in 2Q12. Effective as of April, electricity prices rose by 8.7%, which we expect to impact margins negatively. Akcansa's share price rose 1.1% after financials were released on Friday, and we view them as slightly negative. We reiterate our Buy recommendation for the stock with a target price of TRY 9.00. |
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| 23. Turkish Emlak Konut REIT receives TRY 475.7mn bid for its Zekeriyakoy land |
| Erste |
| May 15, 2012 Emlak Konut REIT received a highest bid of TRY 475.7mn for a 32.25% land share of the revenue sharing project on its Zekeriyakoy land, the appraisal value of which is TRY 252.9mn as of March 29, 2012. The tender value implies a 1.88x premium factor, higher than the company's 1.35x premium factor on average for previous RSM projects. Separately, according to a report in daily Hurriyet, CEO Murat Kurum stated that the company plans a tender of at least 10-12k residential units this year, but may reach 15k units. The company plans to further expand its land portfolio with its cash position of TRY 1bn, as well as to open tenders for certain parcels of land this year. The company plans to hold tenders for projects in West Atasehir (300 commercial units), Sultanbeyli (500 residential units), Izmit Korfez (1000 residential units) and in the Istanbul Finance Center region (1-1.5k residential units) this year. Additionally, the company aims to hold a tender for the project (1.5-2k residential units) on recently bought 180k sqm land in Kartal from TOKI before the year-end. Kurum stated that there are negotiations between Emlak Konut, TOKI and the Ministry of the Environment and Urbanization for the transformation of a 2mn sqm area in Istanbul. The company has TRY 2.3bn receivables from previously sold units, Kurum said. The company sold a total of 2,039 residential units (worth TRY 556mn) in the first quarter of this year. We think that the company's heavy tender season this year as well as recently received attractive bid from its Zekeriyakoy tender should have a positive impact on the share price. Emlak Konut REIT has underperformed Sinpas REIT and Torunlar REIT by 7% and 16%, respectively, since the beginning of the year. It has also underperformed the ISE- 100 index by 8% over the past year. |
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| 24. Turkish TAV Airports Holding announces dividend payment date |
| Erste |
| May 15, 2012 TAV Airports Holding will pay its previously announced TRY 0.25 dividend payment from 2011 earnings on May 15 (tomorrow). TAV's management's proposition to distribute a gross cash dividend payment of TRY 0.25 per share (net: TRY 0.2125) was accepted at the General Assembly. The dividend payment corresponds to a dividend yield of 2.7% per share, given the current share price of TRY 9.44. The total cash outflow from the company will be TRY 90.8mn (~EUR39mn), which implies a 79% payout ratio from 2011 net earnings. TAV's net debt position stood at EUR 907mn as of end-March 2012. |
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