Turkey Wake up call: Macro, Political and Equity News, 10th April

This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.

Wake – up call

BIST jumped another 2.80% yesterday as continued rebound in global peers buoyed the mood for Turkish stocks as well. Index had a positive open around the 94.2k mark and traded within a 700-point range until around 3:30PM when the market gained further traction on FED's new stimulus package and a separate statement from IMF's managing director that they have a very constructive engagement with all members including Turkey. BIST100 ralllied 2,220 more points to close at its daily peak. It was the key banking names like GARAN, YKBNK, and AKBNK this time as the banking sector index surged 6.61%. Aviation stocks, Koza Group names, TUPRS, SISE, and TTRAK were among the better performers of non-financials while FROTO, ALKIM, and BRISA were some of the rare decliners in the BIST100 space. Our local macro agenda for today showcases the unemployment statistics for January'20 to be released at 10AM local time. Headline unemployment had climbed 0.4pp from a month ago to 13.7% in December while remaining a tad above the 13.5% level for same month of 2018. On the other hand, seasonally-adjusted employment had inched down 0.1% on a sequential basis to a 1-year low of 13.1%. BIST seems off to a sideways start in absence of major triggers given Easter holidays in most major markets. Lira is somewhat weaker though with USDTRY pair at 6.6964 vs 6.6550 at yesterday's closing bell.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 908... According to the Health Ministry, the number of deaths from coronavirus increased by 96 people yesterday and reached 908. The total number of tested and infected people are 276,338 and 42,282 in Turkey.

(=) Turkey to produce coronavirus test kits... According to Anadolu Agency, a Turkish technology company announced it started working on producing country’s indigenous test kits for the diagnosis of the coronavirus.

(=) Diesel and gasoline prices reduced... Accordingly, retail prices of diesel and gasoline have been reduced by TL0.09/liter and TL0.12/liter respectively.

(=/-) The World Bank revised its macro estimates for Turkey... In its Spring 2020 Economic Update for Europe and Central Asia, the World Bank revised down its 2020E GDP growth estimate to 0.5% YoY for Turkey, from the previous of 3.5%. The growth in 2020E is estimated to be largely supported by Government subsidies. The World Bank foresees 4% YoY GDP growth for 2021E and 2020E. For inflation, the World Bank estimates 11% year end CPI for 2020, then will ease to 9% in 2021E and 8.5% in 2022E. On budget deficit, the World Bank expects it to increase to 4.5% of GDP in 2020 but decline to 2.9% of GDP by 2022.

(+) IMF constructıvely engaged with Turkey... IMF managing director Kristalina Georgieva said that IMF has good relationships with Turkey and other member countries. She also added that IMF constructıvely engaged wıth Turkey.

Sector and Company News:

(=) ISCTR bought 5.25mn lots of SISE shares with TRY4.32 – 4.43 price range per share. Its share in SISE reached to 68.07% by this transaction.

(=/+) BIMAS’ BoD decided to initiate a share buyback programme. Share buy-back programme is expected to start following the approval of General Assembly which is expected to be held on May 5, 2020. Maximum amount of shares are decided as “up to 7mn of shares” and the maximum amount of funds allocated for share buy-back is TL400mn. Note that last closing price of BIMAS shares was TL50.50, indicating 20.1x 1y fwd P/E which has c. 20% discount compared to its 5y quarterly average P/E.

(=/+) ULKER According to the media sources, Malaysia, one of the most important producer of palm oil, increased its palm oil production and inventory level. In this regard, palm oil prices face 'large decline' as pandemic hammers exports, industry players said. Also note that palm oil prices declined by c. 20% YTD. However, we see c. 20% YoY increase in 1Q20. We expect such a normalization in palm oil prices, which increased by c. 50% in 4Q19, is to support the profitabiliy of ULKER in 2021. Recall that palm oil constitutes around 10% of ULKER’s input costs, indicating c. 6% of total COGS and the Company has already purchased most of its palm oil requirements one year before.

(-) CBRT international reserves… According to the latest CBRT data released on Thursday, the Central Bank’s gross international reserves declined by 6.13% WoW from USD95.5bn to USD89.7bn. The decline in gross reserves has been 16% by monthly comparison. Net international reserves declined by 16.62% from USD32.5bn to USD27.1bn WoW. However, comparing to last month, the decline in net reserves has been 27% from around USD37.0bn to USD27.1bn.


Exhibit 1: The change in gross and net international reserves of CBRT

CBRT International Reserves (USD,mn) 03/04/2020 27/03/2020 06/03/2020 05/04/2019 03/01/2020 w/w m/m y/y y-t-d
Net Reserves 27,140 32,552 37,180 27,942 40,985 -16.62% -27.00% -2.87% -33.78%
Gross Reserves 89,699 95,554 106,985 97,438 105,561 -6.13% -16.16% -7.94% -15.03%

Source: CBRT analytical balance sheet

Exhibit 2: The graph for gross and net international reserves of CBRT beginning from Jan-19



Source: CBRT analytical balance sheet


(-) Foreign investors’ outflow slightly declined in equities, elevated in GDDOs comparing to previous week… According to the CBRT data released on Thursday, during the week of 27 March – 02 April, non-residents executed net outflow of USD185mn from equities and USD338mn from GDDOs. As of last week, non-residents’ y-t-d net total flow of securities has been USD-2.26bn from equities and USD-4.70bn from GDDOs.


Exhibit: Non-residents’ y-t-d net flow of securities (Weekly)



Source: CBRT weekly securities statistics


(=) BRSA weekly banking data… According to the BRSA weekly banking data, total loans increased by 1.39% WoW. The main driver of the loan growth sourced from i) commercial and other loans (1.85%), ii) instalment commercial loans and corporate credit cards (1.32%) and iii) SME loans (1.11%) in line with the expectations arised from the economic support programs that all banks announced previous week. Consequently, together with the low consumer demand, consumer loans were up by only 8 bps WoW sourced from 20 bps increase in mortgage loans.

NPLs continued its declining trend, down by TRY821mn WoW that indicates -1.61%. And the banking sector NPL ratio has been 5.21%, down by 10 bps weekly.

Total deposits increased by 2.29% WoW mainly sourced from declining household expenditures due to quarantine conditions. While natural persons total deposits increased by 1.94%, official and other institutions deposits increased substantially by 14% WoW.

Residents’ FX deposits declined slightly by 1.36%, both real persons and corporates sold mainly Euros rather than US dollars. Real persons’ USD equivalent Euro deposits declined by 4% and corporates’ moved down approximately 5% WoW.


(TL, mn) 03/04/2020 27/03/2020 06/03/2020 05/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Loans 2,911,212 2,871,259 2,769,049 2,506,025 2,646,894 1.39% 5.13% 16.17% 9.99%
Consumer Loans 510,366 509,952 500,955 403,527 467,381 0.08% 1.88% 26.48% 9.20%
Housing 211,415 211,000 208,417 184,704 199,268 0.20% 1.44% 14.46% 6.10%
Vehicle 7,071 7,071 7,016 6,284 7,051 0.00% 0.78% 12.53% 0.28%
GPL 291,879 291,881 285,522 212,539 261,062 0.00% 2.23% 37.33% 11.80%
Consumer Credit Cards 112,056 114,168 115,017 102,038 116,791 -1.85% -2.57% 9.82% -4.05%
Commercial and Other Loans 2,288,791 2,247,138 2,153,077 2,000,460 2,062,722 1.85% 6.30% 14.41% 10.96%
Installment Commercial Loans and Corporate Credit Cards 472,624 466,482 458,612 423,582 434,411 1.32% 3.06% 11.58% 8.80%
SME Loans 665,511 658,212 641,008 634,259 611,735 1.11% 3.82% 4.93% 8.79%
Fx Indexed Loans 9,940 10,029 10,521 26,079 11,808 -0.89% -5.52% -61.89% -15.82%

(TL, mn) 03/04/2020 27/03/2020 06/03/2020 05/04/2019 03/01/2020 w/w m/m y/y y-t-d
Non Performing Loans 151,617 152,438 152,360 106,702 150,758 -0.54% -0.49% 42.09% 0.57%
Consumer Loans 13,361 13,533 13,736 12,589 13,355 -1.27% -2.73% 6.13% 0.05%
Housing 1,179 1,196 1,223 1,099 1,269 -1.40% -3.57% 7.31% -7.07%
Vehicle 174 181 198 232 201 -3.75% -11.99% -24.95% -13.38%
GPL 12,008 12,156 12,316 11,259 11,885 -1.22% -2.50% 6.66% 1.04%
Consumer Credit Cards 6,317 6,420 6,544 6,601 6,323 -1.61% -3.46% -4.29% -0.09%
Commercial and Other Loans 131,939 132,485 132,080 87,512 131,081 -0.41% -0.11% 50.77% 0.65%
NPL Ratio 5.21% 5.31% 5.50% 4.26% 5.70% -1.90% -5.35% 22.32% -8.56%

(TL, mn) 03/04/2020 27/03/2020 06/03/2020 05/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Deposits 2,833,837 2,770,329 2,674,176 2,187,481 2,567,331 2.29% 5.97% 29.55% 10.38%
Natural Person 1,731,745 1,698,707 1,661,914 1,343,672 1,595,204 1.94% 4.20% 28.88% 8.56%
Demand 446,308 432,336 411,854 271,918 360,147 3.23% 8.37% 64.13% 23.92%
Time 1,285,436 1,266,371 1,250,061 1,071,753 1,235,056 1.51% 2.83% 19.94% 4.08%
Commercial Institutions 909,868 902,918 837,513 707,120 817,594 0.77% 8.64% 28.67% 11.29%
Demand 271,583 275,306 247,965 174,037 220,838 -1.35% 9.52% 56.05% 22.98%
Time 638,286 627,611 589,548 533,083 596,757 1.70% 8.27% 19.73% 6.96%
Official and Other Institutions 192,224 168,704 174,749 136,690 154,533 13.94% 10.00% 40.63% 24.39%
Demand 37,261 35,423 32,789 27,316 33,914 5.19% 13.64% 36.40% 9.87%
Time 154,963 133,281 141,960 109,374 120,619 16.27% 9.16% 41.68% 28.47%
Deposits Subject to Insurance 745,070 735,143 728,763 520,285 698,978 1.35% 2.24% 43.20% 6.59%

Total Fx Deposits with Banks (USD, mn) 213,725 218,788 222,882 202,734 214,491 -2.31% -4.11% 5.42% -0.36%


(USD, mn) 03/04/2020 27/03/2020 06/03/2020 05/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total FX Deposits of Residents 179,822 182,307 187,175 177,960 184,087 -1.36% -3.93% 1.05% -2.32%
Real Persons 101,644 103,283 107,596 100,658 107,919 -1.59% -5.53% 0.98% -5.81%
Dolar ($) 68,839 69,333 71,918 69,272 73,788 -0.71% -4.28% -0.63% -6.71%
USD Eqv. of Euro 30,174 31,274 33,170 29,361 31,705 -3.51% -9.03% 2.77% -4.83%
Corporates 74,497 75,598 75,989 72,216 72,360 -1.46% -1.96% 3.16% 2.95%
Dolar ($) 38,126 37,418 36,269 40,564 37,364 1.89% 5.12% -6.01% 2.04%
USD Eqv. of Euro 35,428 37,168 38,672 30,886 34,181 -4.68% -8.39% 14.71% 3.65%