Turkey Wake up call: Macro and Political News, 27th January

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Wake – up call

BIST inched down 0.33% on Friday. Banks lost 0.11% on average with weakness in GARAN and AKBNK vs some gains in ISCTR, YKBNK, HALKB and VAKBN. THYAO, ISCTR, DOHOL, SOKM and VAKBN stood out as better performers while BIMAS, TCELL, EREGL, GARAN and TUPRS were among the weakest non-financials. We expect negative opening for the market, in-line with the global markets.
Macro and Political News:
(=) Ankara refuses to abandon Tripoli in its legitimate fight… President Erdogan said on Friday that Turkey will continue to support Libya’s U.N.-recognized government and its leader Fayez al-Sarraj, underlining that it is Turkey’s right and responsibility to side with the Libyan people given its 500 years of ties with the country. Speaking at a joint press conference with German Chancellor Angela Merkel in Istanbul, President Erdogan reiterated that Turkey is determined to provide as much support as it can to Libya’s legitimate government and the Libyan people against the eastern-based illegitimate forces of Gen. Khalifa Haftar. Erdogan emphasized that supporting Libya’s Government of National Accord (GNA) is not an option but an obligation under U.N. Resolution 2259. Touching upon the latest developments in Libya, Erdogan said that the increase of attacks by Haftar forces in recent days show that Haftar does not have the intention to reconcile.
Regarding diplomatic initiatives and peace efforts initiated by international actors, Merkel said that the fragile cease-fire in Libya must be turned into a solid and sustainable one. Merkel added that it was very important for both sides to agree with all the 55 articles at the Berlin conference. Merkel confirmed that articles agreed at the Berlin conference on Libya will be approved by the U.N. Security Council. In response to Merkel’s statement, Erdogan said that despite the fact that Haftar accepted the terms, he did not sign any deal.
Regarding the situation in northwestern Syria’s Idlib, President Erdogan called on the EU and European countries to provide more and faster assistance to Syria, saying that it is a humanitarian responsibility. In the face of Assad regime’s attacks targeting civilians and residential areas in Idlib, Erdogan also said all parties need to put pressure on the Syrian regime to stop the bloodshed in Idlib. Recall, Turkey and Russia agreed in September 2018 to turn Idlib into a de-escalation zone in which acts of aggression are expressly prohibited. Since then, more than 1,300 civilians there have been killed in attacks by the regime and Russian forces as the cease-fire continues to be violated.
Other important topics discussed by the leaders at the press conference were bilateral relations, Turkey-EU relations and the Turkish diaspora in Germany. Saying Turkey is determined to boost cooperation with Germany in the fields of economy, trade, investment, energy and tourism, Erdogan added that Turkey has decided to pursue their rooted bilateral relations. Erdogan underscored that Germany will be the EU term presidency in July, and highlighted that he sees this as an important opportunity for Turkey-EU ties. To remind, Turkey has been preparing a new initiative to accelerate the accession process to the European Union. Accordingly, Turkey will complete regulations for six more chapters, including the fight against terrorism. Relations between Turkey and the EU entered a complicated period due to the EU’s negative stance against Turkey following the July 2016 failed coup attempt. Emergency measures taken by Turkey following the coup attempt drew negative criticism from the EU.
(=) Turkey joins 4th Industrial Revolution Network of WEF… Turkey announced Friday a national technology center has joined the Centre for the Fourth Industrial Revolution (C4IR) Network of the World Economic Forum (WEF). MEXT Technology Center, established by the Turkish Employers’ Association of Metal Industries (MESS), joined the C4IR Network. With the cooperation agreement inked at Davos on the sidelines of the 50th annual meeting of WEF, the Turkish technology center has been registered among a few centers in the world affiliated with WEF. With MEXT, Turkey will able to carry onto the international platform and shape global policies. MEXT will prepare road maps for Turkey in several areas such as the internet of things (IoT), artificial intelligence (AI), autonomous vehicles, drones, blockchain and robots.
(-) Half of Chinese January bookings for Turkey cancelled amid deadly virus outbreak… Almost half of the bookings by Chinese tourists for Turkey were cancelled ahead of a busy travel period for the Chinese due to a deadly new virus outbreak in the Asian country’s southern city of Wuhan late last month. More than 30,000 Chinese tourists were expected to visit Turkey in January, a busy month for Chinese tourists as many people make their Lunar New Year holiday plans throughout the country and overseas in this month, but this number is now likely to decrease. The spread of the outbreak caused the shutdown of at least 13 cities in China, including Wuhan, Ezhou, Huanggang, Chibi, Qianjiang, Zhijiang, Jingmen and Xiantao, all in central China's Hubei province, where the illness has been concentrated.
The number of Chinese tourists visiting Turkey has been on the rise over the last four years. A total of 403,739 Chinese tourists came to Turkey last year, while the number was 313,704 in 2015. Some 25,033 of them travelled to the country in the first month of 2019, while almost 7 million Chinese tourists were estimated to have travelled overseas in the same month of the year.
(=/+) Size of retail sector reaches USD193bn in 2019… The size of Turkey’s retail sector reached TRY1.1tln (USD193bn), according to a report by audit and consultancy firm KPMG Turkey. The industry contracted in the first three quarters of 2019 by 5.3%, 3.9%and 1%, respectively last year. The initial indicators suggest a recovery in 2020, the report added.
There were a total of 453 shopping centers across the country as of end 2018 and only five more opened in 2019, the report noted, adding that nine more shopping malls are expected to open doors this year. The report also showed that the rate of people using online channels for shopping reached 34% in Turkey last year, up from 29.2% in 2018. KPMG also noted that the global retail trade sector’s size, which reached USD25 tln in 2019, is expected to reach USD30tln in three years.
(=) Foreign bond holdings decreased in the week of January 10-17… According to the CBRT data, during the week of January 10-17, foreign investors were net buyers of USD300mn in the equity market, and net sellers of USD325mn in the bond market. There has been USD5mn inflow in the corporate bond market. Equity flows in 52-week total terms, turned to outflow of USD251mn from an inflow of USD261mn in the previous week, while bond market outflows increased to USD3.3bn from USD3.1bn in the same period. Finally, corporate bonds outflows rose to USD229mn from USD214mn.
(=) Turkey sees over 84,000 newly established firms in 2019… Turkey saw 84,102 newly established companies in 2019, down by 1.38% on an annual basis. Some 13,197 companies went out of business over the year, up by 5.04% versus 2018, according to a report of Turkish Union of Chambers and Commodity Exchanges (TOBB) on Friday. Over 86% of newly established firms were limited companies, while 13.6% of them were joint stock companies. The top three fields of operation among new companies were wholesale and retail trade, manufacturing and construction. In 2019, 12,634 companies with foreign partners were established. The most, some 35,794, opened their doors in Istanbul, followed by the capital Ankara with 8,673, and the Mediterranean resort city Antalya with 3,778. Meanwhile, the number of newly-established companies soared 23.49% year-on-year in December to reach 7,849 firms on a yearly basis. In December, 2,201 firms were liquidated, up by 7.4% versus the same month previous year.
(+) Interest rates on deposits down to three-year low… Average interest rates on deposits in the Turkish banking industry have been falling since the second half of 2019 and hit 9.6 percent, which marked a three-year low, state-run Anadolu Agency reported. Interest rates for deposits, which averaged at around 23% in June last year, have gradually come down below 10 percent in 2020. As of Jan. 17, those rates were 9.6%. Interest rates for up to one-month, three-month and six-month deposits stood at 9.21%, 10.33% and 9.25%, respectively. As for up to one-year and more than one year deposits, interest rates were 9.54% and 9.65%.
Data from the Banking Regulation and Supervision Agency (BRSA) showed that deposits collected by local banks rose 1% on a weekly basis to stand at TRY2.57tln (USD153bn) as of Jan. 17. Interest payments for deposits amounted to TRY164bn in January-November last year, up from TRY134bn in the same period of 2018.
(=) Treasury Auction: Turkish Treasury will reoffer 2yr 6M fixed coupon bonds today.
(=) Capacity utilisation ratio (Jan) and Real sector confidence index (Jan) to be released at 10:00AM local time… There is no consensus available.

Sector and Company News:
(=) ENKAI bought 916k lots of its own shares with TRY6.63-6.68 price range per share.
(=) Turkey suspends Akbank insurance intermediation for 15 days… Ministry of Treasury and Finance’s Insurance General Directorate has issued an administrative penalty of TRY 94.7mn to AKBNK and suspended its insurance intermediation activity for 15 days between Jan. 30-Feb. 13, on the basis of violation of Article 32 of Insurance Law and related legislation. Turkish lender said in exchange filing that the fine will be paid by benefiting from a 25% advance payment discount and that suspension decision and fine won’t have any material impact on financial statements. In a separate filing, Aksigorta and AvivaSa said there won’t be any material impact in operations or financial statements. Also note that Akbank gets approval to sell up to USD2bn debt abroad. With the approval by Capital Markets Board, Akbank may sell bills, bonds and subordinated debt.
(=) Ministry of Treasury and Finance’s Insurance General Directorate has issued an administrative penalty of TRY 187.1mn to YKBNK and warned the bank regarding the authority of the directorate to suspend the insurance intermediation activity. The bank said in exchange filing that the fine will be paid by benefiting from a 25% advance payment discount.
(=/-) Antalya Airport’s planned tender on investments for capacity increases and renting operational rights of terminals was cancelled, according to the notice in Official Gazette. Recall that a tender notice was released in Official Gazette at the beginning of this month and the new tender was expected to take place on 31 January 2020. The airport’s current operators Fraport and TAV were preparing a bid for the airport’s tender. Winning the tender together with Fraport was anticipated to be a potential catalyst for TAV hence cancelation of the tender could have an initial negative impact on the share price.