Turkey Wake up call: Macro, Political and Equity News, 16th 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 retreated 2.73% yesterday in partial reversal of its recent rally. Index had a slight positive start and tested 99k levels in early trades, but a sharp sell-off that coincided with the weakness in lira shed some 4,400 points from the headline within an hour. A partial recovery and sideways trading in a tight range was name of the game for the rest of the day. Banks led by AKBNK and ISCTR felt the brunt of the sell-off as their sector index was down 4.95% for the day. Aviation stocks turned sharply south after a strong start and topped the decliners along with TUPRS, TTKOM, KCHOL, SAHOL, ENKAI, AEFES, and KOZAL while retailers and foodstuff producers as well as EREGL & ISDMR were among the rare names that bucked the broad-based slide. Today, our local agenda is muted and eyes will be on peer markets and the currency for a sense of direction. Accordingly, we project BIST to have a slight negative open given losses in most Asian indices and small weakness in lira (USDTRY now at 6.9087 vs 6.8971 at yesterday's closing bell). U.S. futures are down c.0.3% in early trades, but we note the 0.6-1.1% overnight gains in main indices after the hour we left.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 1518... According to the Health Ministry, the number of deaths from coronavirus increased by 115 people yesterday and reached 1518. The total numbers of tested and infected people are 477,716 and 69,392 in Turkey.

(-) Central Government budget deficit: TL32bn in March 2020... The Treasury released the Central Government Budget realizations for March 2020. Accordingly, the budget revenues were TL47bn in March 2020, down by 13% YoY while the budget expenses increased by 16% YoY to TL80bn. Thus, the Central Government Budget deficit expanded to TL32bn from TL13bn deficit in March 2019. On cumulative basis, the Central Government Budged surplus came in at TL8.7bn in January-March 2020.

(=) An omnibus bill ratified in the Parliement... Accordingly, the omnibus bill includes i) Turkish Wealth Fund will have some exemptions in order to invest strategically crucial companies which are having difficulties, ii) companies will be allowed to pay out up to 25% of its distibutable earnings from 2019 net income until the end of September 2020.

(=) Turkey and Russia hold 4th joint patrol in Syria... According to AA news agency, Turkish and Russian troops conducted fourth joint ground patrol in northwestern Syria in line with the Moscow agreement, Turkey’s National Defense Ministry said on Wednesday.

(=) Albayrak’s remarks on covid-19 measurements... According to Hurriyet, Treasury and Finance Minister Berat Albayrak underlined that they already distributed over TL12bn to 2.1 million low-income households amid the COVID-19 pandemic, adding that 2.3 million more households will receive aid soon. In his tweet, Albayrak stated that all of the Government institutions are mobilized to convey support implemented as part of the Economic Stability Shield. Albayrak also cited that State Banks already lended TL12.1bn to 2.1mn people with monthly incomes under 5,000TL. State Bank Halkbank already provided TL6.7bn loan to ~200k shop owners. Additionally, ~40k SME have obtained loans amounting to TL36.3bn. The minister reiterated that his office would push forward to solve problems between private banks and their customers regarding demands for loan repayment deferments and restructuring. “We have heard that those who want to restructure a loan plan or to settle a savings account face excessive costs. It is unacceptable. We want it to be known that we will address these issues meticulously,” said Albayrak.


Sector and Company News:

(=) ISCTR bought 1mn lots of SISE shares with TRY4.57 – 4.67 price range per share. Its share in SISE reached to 68.55% by this transaction.

(=) SISE bought 2.2mn lots of TRKCM shares with TRY3.16 – 3.20 price range per share. Its share in TRKCM reached to 71.59% by this transaction.

(=) SISE bought 1.3mn lots of ANACM shares with TRY3.19 – 3.26 price range per share. Its share in ANACM reached to 77.97% by this transaction.

(=) ARCLK extended to halt production in Pakistan, Bangladesh and South Africa as the authorities extended curfews in the context of combating the Covid-19 pandemic. The impact of suspending production in these countries temporarily on Company’s financials is limited. Curfews are expected to continue until April 25 (Previous: April 5) in Bangladesh, and April 30 (Previous: April 17) in South Africa and Pakistan. Production in Russia has started after the curfew ended on April 15. Sales portion of these countries constitutes around low teens of ARCLK’s consolidated sales in 2019.

(=) Monthly house sales statistics.. According to the monthly house sales statistics released on Wednesday;

• Last March, total house sales decreased to 108.670, down by 8.5% MoM

• Mortgage sales slightly contracted by 0.9% MoM however it significantly increased YoY terms, from 22.762 to 43.329, up by 90%. The share of mortgage sales has been 40% in total sales in March which was 22% in last year.

• First sales declined by approximately 9% to 34.089 MoM and comparing to the last year, the decline has been 23%. The share of the first sales in total sales has been 31.37% in March however last year this rate was 42.04%. This indicates that the current excess house supply is eroding in a slower pace.

• Sales to foreigners has been 3.036, down by %24 MoM and 3% YoY. The share of sales to foreigners has been 2.79% in total sales in March, remained flattish with the YoY terms which was 2.98%.

Exhibit: Monthly comparative house sales data
Monthly house sales data 03-2020 02-2020 03-2019 01-2020 MoM YoY Y-t-d
Total Sales 108,670 118,753 105,046 113,615 -8.5% 3.4% -4.4%
Mortgage Sales 43,329 43,733 22,762 42,237 -0.9% 90.4% 2.6%
Share of mortgage sales in total sales 39.87% 36.83% 21.67% 37.18% 8.27% 84.01% 7.25%
First Sale 34,089 37,303 44,163 36,040 -8.6% -22.8% -5.4%
Share of first sales in total sales 31.37% 31.41% 42.04% 31.72% -0.14% -25.39% -1.11%
House Sales Numbers to Foreigners 3,036 4,005 3,129 3,907 -24.2% -3.0% -22.3%
Share of sales to foreigners in total sales 2.79% 3.37% 2.98% 3.44% -17.16% -6.21% -18.76%

Source: TURKSTAT

Together with March data, in 1Q20, while total sales declined by 4.4%, mortgage sales inched up by 2.6%. First sales contracted by 5.4% and sales to foreigners declined substantially by 22%.