Turkey Wake up call: Macro and Political News, 18th February

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Wake – up call

BIST climbed 0.53% yesterday as foreign institutional investors seemed to better buyers in various blue-chip names. Benchmark index had a positive start and spent the entire day in the green, mostly in a 700-point range between 120.6-121.3k. Banks fell behind with an average 0.27% gain for the day as GARAN outperformed while VAKBN, ISCTR, and YKBNK closed lower. THYAO, PGSUS, TAVHL, TUPRS, KRDMD, KOZAL, TTKOM, and GUBRF stood out among the gainers while TOASO, SISE, ULKER, and ASELS topped the non-bank decliners. Coming to this morning, our local macro agenda is muted but we anticipate a downtick open for the BIST as global equities are under pressure following Apple’s profit warning on coronavirus impact. U.S. futures are down 0.3% in early trades and Asian equity indices are almost all trading in the red. Lira is also a tad weaker with USDTRY pair at 6.0568 vs 6.0513 at yesterday’s closing bell.
Macro and Political News:
(=) Turkish army full alert on Syria… The Turkish Armed Forces (TSK) have been reinforcing military bases in northwestern Syria, while the guns point at forces loyal to the Bashar Assad regime, which has been committing greater atrocities every day in recent weeks and not refraining from attacking Turkish soldiers in the region. The TSK has virtually built a barricade of steel in an area of 60 kilometres in order to stop the advancement of the Assad regime. On the other hand, the Syrian regime has seized 30 villages and towns around Aleppo.
Since the areas being attacked neighbour the Operation Olive Branch region, many civilians went to Afrin, and long queues of vehicles have formed on the Afrin-Idlib road once again. The TSK has sent a large part of its reinforcements to this region in the last week due to the Syrian regime's operations launched in western Aleppo. Thousands of commandos and armoured vehicles were deployed 20-30 kilometres away from the Cilvegozu border gate in southern Hatay’s Reyhanli district. Turkey has frequently voiced that it will not refrain from retaliating against Assad forces in the case of any further attack on its military and posts. The Turkish military has set up dozens of military bases in western Aleppo and in several villages in Idlib’s east. A high number of howitzers, multiple rocket launchers and tanks were deployed, while the barrels of the howitzers in the region were pointed at the Syrian regime forces. Reinforcement of the recently established base in Sarmada district just 6 kilometres from the Turkish border has continued throughout the night, raising the number of armoured vehicles sent by the TSK to the region to 3,000.
(+) Turkey and Russia discuss measures to defuse tensions in Syria’s Idlib… Deputy Foreign Minister Ambassador Sedat Onal and his delegation met their Russian counterparts in Moscow late Monday. The parties discussed measures to defuse tensions in Syria's Idlib, a statement said. The statement from the Foreign Ministry added that the Turkish delegation underlined the need to defuse tensions on the field and to prevent the further worsening of the humanitarian situation. The ministry added that the talks would continue on Tuesday, highlighting that all measures to fully implement to Sochi deal and to prevent violations have been discussed.
(+) Turkey and Russia strive to find solution to conflict in NW Syria… Ankara and Moscow continue to cooperate to reach an agreement on a lasting cease-fire for the warring parties in the northwestern Syrian province of Idlib. Foreign Minister Mevlut Cavusoglu said Monday that officials should not let the issue damage Turkish-Russian ties. Cavusoglu said that there is a lot of work to cover, stressing that the two countries must not let the Syrian problem affect cooperation and relations. The meeting’s outcome will determine the necessity of further talks on the problem. Meanwhile, Russian Foreign Minister Sergey Lavrov said they hope that the Ankara-Moscow talks will de-escalate tensions in the region, as the two sides are in constant contact with each other regarding the developments on the ground.
(+) US President Trump thanks Erdogan for preventing humanitarian crisis in Idlib… The U.S. President Donald Trump thanked President Erdogan by phone for preventing a “humanitarian catastrophe” in northwestern Syria's Idlib province. Trump expressed concern over the violence in Idlib, Syria and thanked Erdogan for Turkey’s efforts to prevent a humanitarian catastrophe. President Trump conveyed the United States' desire to see an end to Russia’s support for the Assad regime’s atrocities and for a political resolution to the Syrian conflict. The two leaders also discussed the need to eliminate foreign interference in Libya. Central government budget posts TL 21.5bn surplus in January.
(+) The Turkish central government budget balance saw a surplus of TL21.5 bn in January... Turkey’s budget revenues rose 26% to hit TL122.17bn YoY in January. The country’s budget expenditure was TL100.7bn in the month, up 9.6% from the same month last year. Excluding interest payments, the budget balance also saw a surplus of TL 34.25bn in January, while interest expenditures totalled some TL 12.74bn. Government tax revenues reached TL67.4bn last month, posting a 21% rise on an annual basis. The country's economic program, announced last September, aims to keep the budget deficit-to-gross domestic product (GDP) ratio at 2.9% in 2019, 2020 and 2021.
(=/+) The CBRT likely to deliver additional rate cuts… Economists forecast that the CBRT will cut interest rates this week, according to the state-run Anadolu Agency survey on Monday. The second MPC meeting of 2020 will be held on Wednesday to announce the bank’s decision on interest rates. While seven out of 21 economists surveyed by Anadolu Agency expected no change in interest rates, the remaining 14 economists forecast a drop in the rate, ranging between 25 and 75 bps. Three economists expected 75bps, nine expected 50bps points, and two expected 25bps, the survey found. Last month, the CBRT cut its 1W repo rate – also known as the bank’s policy rate – to 11.25%.

Sector and Company News:

(=) ENKAI bought 400k lots of its own shares with TRY6.76-6.77 price range per share.

(=) SAHOL announced that it signed a letter of intent with Skoda Transportation's controlling shareholder PPF to establish a 50-50% partnership to acquire its former commercial vehicle manufacturer subsidiary Temsa Ulasim. SAHOL had sold Temsa Ulasim to private equity firm True Value Capital in May'19 at a total valuation of TL375mn in equity and TL825mn in enterprise value. The bus maker had run into financial difficulties under its new owners and halted production in a matter of months.