Turkey Wake up call: Macro and Political News, 15th January

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Wake – up call

BIST climbed another 0.98% inthe 6th consecutive day of its winning streak as Turkish stocks managed to outperform global peers. After some wobble in the first hours of the day, index turned north and gradually ascended to 121.5k levels where it closed. Banks added 1.20% on averagewith state lenders and ISCTR leading vs the lagging GARAN and YKBNK. MGROS, KRDMD, TTKOM, ENKAI, AEFES, MAVI, and TCELL topped the gainers of non-financials while TUPRS, KOZAL, TAVHL, EKGYO, and airlines were among the decliners. Coming to this morning,our local macro agenda involves TurkStat’s residential sales data for December’19 due at 10AM local time. Home sales had ascended 54.4% yoy in November to 138.4k units on base effects as well as the 724.8% jumped in mortgage-backed transactions that surgedfor the fourth month in a row following the state banks' trimming of their monthly mortgage loan rates to an advantageous level below 1%. Separately, December'19 central government budget numbers are due 11AM. We foresee a slight negative open for the BISTas global equity markets are taking a breather on concerns about U.S.-China trade tensions beyond today’s phase-one deal signing. U.S. futures are down about 0.2% and Asian markets are mostly trading in the red.
Macro and Political News:
(=) Erdogan: Turkey ready to teach a lesson to Haftar after Libya talks end without resolution… President Erdogan said Tuesday that Turkey will teach a lesson to Khalifa Haftar and his rebel forces in eastern Libya if they continue their attacks against Libya’s internationallyrecognized government after abandoning cease-fire talks in Moscow. Speaking at the ruling Justice and Development (AK) Party’s meeting in the capital Ankara, Erdogan said that Haftar ran away from Moscow after Monday’s indirect peace talks between him andthe head of the Tripoli-based government, Fayez al-Sarraj, while Libya’s U.N.-recognized government was conciliatory. Erdogan underscored that Turkey will not hesitate to teach a deserved lesson to Haftar if he continues his attacks on the country’s legitimateadministration in Libya. Recall, Haftar left Moscow on Tuesday without signing a peace deal aimed at ending nine months of fighting with the U.N.-backed government in Tripoli, following Turkey and Russia’s joint efforts for a political solution. More negativenews is that forces loyal to rebel commander Khalifa Haftar launched missile strikes to the south of Libya’s capital on Tuesday. Pro-Haftar mercenary soldiers deployed in the region and drones operated by the United Arab Emirates flew over Tripoli.
Erdogan also said the issue would now be discussed at talks in Berlin Sunday attended by European, North African and Middle Eastern countries, as well as the U.N., E.U., Africa Unionand Arab League. Turkey will join Germany, Britain and Russia at a summit in Berlin Sunday where Chancellor Angela Merkel is set to host discussions regarding Libya. Sarraj and Haftar were also invited to Berlin.
(=) Erdogan: Turkey to intervene if Assad regime tries to violate Idlib truce… President said Tuesday that Turkey is determined to step in to prevent Assad regime attacks in violation of the truce in Syria's Idlib, as 400,000 civilians are headingtoward the Turkish border amid attacks. Erdogan told a parliamentary group meeting in capital Ankara that Turkey is determined to prevent Assad regime attacks in violation of the truce. Erdogan said Turkey’s anti-terror operation in Syria allowed the countryto smash the terror corridor in the region. The president noted that there are serious discrepancies between promises made to Turkey [regarding Syria] and the actual situation on the field and that they have told relevant parties that Turkey will continueoperations if necessary. He added that as long as the situation in Syria continues to be a matter of survival, it is not possible for us to take any steps back.
Touching upon the situation in Libya, Erdogan said that Haftar left Moscow without signing a cease-fire deal, while Libya’s U.N.-recognized government was conciliatory. He said Haftarinitially signalled he would sign the deal, but left without doing so. He continued by noting that Haftar’s forces would have taken complete control of Libya if Turkey had not interfered.
(+) Turkish intelligence chief held meeting with Syrian counterpart in Moscow… Hakan Fidan, the head of Turkey’s National Intelligence Organization (MIT), reportedly met with the top Syrian intelligence officer on the sidelines of a meeting in Moscow.Marking the first official contact in years, Fidan met with the head of the Syrian National Security Bureau Ali Mamlouk and discussed a number of issues, including the cease-fire in Idlib and the possibility of cooperating against the outlawed PKK’s Syrianoffshoot, the YPG terrorist group in northeastern Syria. Both sides have said there have been intelligence contacts, but this is the first explicit acknowledgment of such a senior meeting.
(+) Turkey’s industrial production up 5.1% in November… Turkey’s calendar-adjusted industrial production soared 5.1% in November 2019 compared to the same month of the previous year, according to official data released on Tuesday.While the mining and quarrying index rose 7.2% and the manufacturing index climbed 5.3%, the electricity, gas, steam and air conditioning supply index fell 1.2% in November 2019 compared to the same month of the previous year, the Turkish Statistical Institute(TurkStat) said. On a monthly basis, calendar and seasonally adjusted industrial production rose 0.7% in November 2019. Mining and quarrying index decreased by 3.1%, electricity, gas, steam and air conditioning supply index decreased by 2.2% in November 2019,while manufacturing index increased by 1.1% compared with the previous month. Industrial production is considered a vital indicator for the economy, as it is seen as a preliminary gauge for GDP growth.
(+) Retail sales volume up 8.5% in November 2019… The retail sales volume with constant prices in Turkey soared 8.5% in November 2019 compared to the same month of the previous year, according to official figures releasedon Tuesday. On an annual basis, drinks and tobacco, non-food (except automotive fuel), and automotive fuel sales rose 0.9%, 13% and 8%, respectively, said the Turkish Statistical Institute (TurkStat). Among non-food items, the volume of computer, book, andtelecommunications equipment sales climbed 20.7%, while textile, clothing, and footwear sales gained 17.5%, and medical goods and cosmetic sales went up 11.5% in the same period. Meanwhile, the sales volume of electronic goods and furniture fell 3% on an annualbasis. Sales by mail order and the internet climbed 41.1% in November 2019 compared to the same month of the previous year. On a monthly basis, the retail sales volume rose 1.7% compared to the previous month. In the same month, food, drinks, and tobacco salesincreased by 0.7%, non-food (except automotive fuel) sales increased by 2.7%, automotive fuel sales increased by 0.6%.
(+) Total turnover up 14.8% in Nov… The Turkish economy saw an annual increase in total turnover in November 2019. Total turnover index including industry, construction, trade, and services sectors increasedby 14.8% on annual basis in November 2019. The index saw the biggest change in the trade sector, up 20.1% on a yearly basis, official figures showed. The services also registered a year-on-year rise of 14.9% as did industry with 10.1% and construction 2.6%.On a monthly basis, the seasonally and calendar-adjusted total turnover index increased by 0.3% in November. According to TurkStat, turnover is an important short-term indicator used to assess the country's economic situation. Turnover Indices are calculatedto follow the changes of this concept which is composed of sales of goods and services invoiced by the enterprise in the reference month over time, to monitor the development in quarterly and yearly basis. All enterprises that declare their value-added taxto the country's Revenue Administration are included in the turnover index calculation.
(=) Turkish Treasury borrowed TRY9.3bn from domestic markets… The Turkish Treasury borrowed TRY9.3bn (USD1.6bn) from domestic markets on Tuesday. Some TRY5.84bn in 15-month zero coupon Treasury bills - first issue - were sold in thefirst auction. The Treasury bills will be settled on Wednesday and mature on April, 14, 2021. The total tender amounted to TRY12.2bn with a 47.8% accepted/tendered rate. The Treasury said the term rate of the 455-day Treasury bills was accepted at 13.23%,while the annual simple and compound interest rates were 10.59% and 10.45%, respectively. In the second auction, the Treasury issued seven-year floating rate Treasury bills - semi-annually, reopen, third issue - totalling TRY3.45bn. The bonds will be settledon Wednesday with a maturity date of Nov. 4, 2026. The total tender in the second auction amounted to TRY6.26bn with a 55.2% accepted/tendered rate. The term rate of 2,485-day government bonds was accepted at 7.17%, while the annual simple and compound interestrates were 14.34% and 14.86%, respectively.
(=) Homes sales (Dec 19) due 10AM local time… There is no consensus available going into publication
(=) Central government budget figures (Dec 19) due 11AM local time… There is no consensus available going into publication.

Sector and Company News:

(=)It is announced that THYAO’s AnadoluJet will fly to 28 international destinations from Istanbul Sabiha Gokcen Airport beginning from 29 March. Recall that Turkish Airlines priory announced that in accordance with growth plans, it will initiate internationalflights from Istanbul Sabiha Gokcen Airport with Anadolu Jet brand. Therefore, at this stage we expect the news to have a limited impact on share price.