Turkey Wake up call: Macro and Political News, 23rd January

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Wake – up call

BIST retreated 0.65% yesterday as Turkish stocks yielded to profit taking after strong year-to-date gains. Index had a positive start and tested 124.5k levels in early going, but the gains started to fizzle out after 10:30AM and the market slipped to negative zone after noontime. Failing to stage a comeback, benchmark BIST100 declined further after 4PM and closed the day in the red after its 4-day winning streak. Banks underperformed with the 1.29% drop in their sector index amid pressure on heavyweights GARAN and AKBNK while HALKB remained strong despite the newsflow related to its U.S. lawsuit. ENKAI, TKFEN, GUBRF, AEFES, and Koza Group names stood out among the top gainers while KCHOL, KRDMD, FROTO, SISE, MGROS, EKGYO, and EREGL came under selling pressure. Today, our local macro agenda highlight will be the January'20 Consumer Confidence Index compiled by TurkStat due 10AM local time. The index had retreated 1.9% on a sequential basis from its 7-month peak a month ago to 58.8 in December. Separately, summary minutes of the latest Monetary Policy Council meeting will be released at 2PM. BIST seems off to a negative start as Chinese virus outbreak concerns are affecting the global risk sentiment this morning while lira is trading flattish. U.S. futures are down about 0.2% in early trades on top of 0.3% overnight losses from the time we left yesterday while Asian equities are almost all in the red with Chinese benchmarks bearing the brunt of the selling.
Macro and Political News:
(=) Finance Minister Albayrak: Turkey attends World Economic Forum with brighter outlook… Treasury and Finance Minister Berat Albayrak said Wednesday that compared with last year, Turkey is taking the stage at this year’s World Economic Forum (WEF) with a much more positive outlook. Albayrak told reporters on the sidelines of the 50th WEF in Davos, Switzerland. He said that there is a positive process going on in Turkey, adding that Turkey is going through a more coherent and synchronized period than ever before. Albayrak further stressed that Turkey sees 2020 as an important year for foreign direct investment (FDI). He remarked that Turkey was a natural hub with its geostrategic location, infrastructure and well-developed human resources. Albayrak further remarked that with the beginning of this year, the Turkish economy has entered a new era, rebalancing in 2019 after losing momentum in the second half of 2018 due to turmoil and high volatility in exchange rates. Albayrak noted that Turkey’s circumstances have now taken a turn for the better, after the country was subject to roughly three currency attacks between June 2018 and June 2019.
Addressing the reporters during the WEF, Murat Uysal, the governor of the CBRT, said the bank reduced the interest rates moderately in January, attributing it to the recovery in inflation expectations. Uysal added that the inflation is expected to reduce to single digits in the mid-year. Uysal also highlighted that Turkish economy proved its strength with the decline in risk premiums, and gradual decrease in inflation, adding that the Turkish economy is now experiencing mobility in the market, which was reflected in consumption.
(=) Second reform package and penalty regulations to be introduced to parliament… The preparations for the second judicial reform package and amendments on the law on execution of sentences are ongoing and will be submitted to parliament by the ruling Justice and Development (AK) Party in a few weeks. Abdulhamit Gul, the Turkish Justice Minister, said in a televised interview said that new regulations about the law on the execution of penalties and the second reform package will be introduced separately to parliament. He expressed expectations on regulations on notaries and administrative procedures to be ratified in parliament simultaneously. Underlining that the amendments in law on execution of sentences are different from a repentance law, the minister said criminal execution should have justice like the penal code. In terms of criminal justice, it is seen that no jail time has been served in certain offenses under two years of 18 months, due to the execution system. Also, there should be a regulation in which the person will serve jail time if he/she harms society again. In this sense, according to the justice minister, the package in question is not an amnesty. Nevertheless, offenses on charges of terrorism, deliberate killing, sexual assault, violence against women and children, genocide, crimes against humanity, human experimentation and organ and tissue trafficking will not be within the scope of the regulation.
(+) Domestic tourism spending sees rise in Turkey… Domestic tourism spending in Turkey rose 10.4% YoY in the third quarter of 2019. Residents spent TRY23.3bn on trips in July-September, compared to TRY21.1bn in the same quarter of the previous year. The third quarter data showed that tourists took 24.3 million trips, falling 2.9% on an annual basis. Domestic trips with one or more than one overnights slipped 1.8% compared to the same quarter of 2018, standing at 31.9 million. The average expenditure per trip was TRY731 (some USD129) from July to September. The highest increases were health expenditures with 36.1%, other expenditures (sports, entertainment, education, jewellery, gold, silver, carpet, and rug) with 21.1% and accommodation expenditures with 14.3%.
(=) OTP Bank in talks to buy Garanti BBVA Romania… Bloomberg claimed that Hungary’s OTP Bank is negotiating the potential purchase to boost its Romanian market share to about 5%. Garanti officials declined to comment while OTP officials told the website they are analysing all potential acquisitions opportunities as part of their growth plan.
(=) Consumer confidence index to be released today 10:00 AM local time…
(=) BRSA weekly banking data to be announced 2:00 PM local time…

Sector and Company News:

(=) ENKAI bought 830k lots of its own shares with TRY6.60-6.63 price range per share.

(+) GUBRF announced that Pasco Investment won the tender of the disposal of GUBRF’s 100% subsidiary Nbulkgas Deniz Isletmeciliği in return for US$75.1mn.

(+) GUBRF will establish Gubretas Maden Yatirimlari company in order to operate in gold mining sector. Recall that Gubretas has Sogut mine and recently the court decided KOZAL to evacuate the Sogut mine and transfer its all rights to GUBRF.