Turkey Wake up call: Macro, Political and Equity News, 19th March

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Wake – up call

BIST lost another 1.38% yesterday as the risk-off sentiment in global markets prevailed. After a gap lower open around the 84.5k mark, BIST100 index rebounded to positive territory to test 87.8k levels. But ongoing weakness in European indices and Americas futures weighed on Turkish stocks and pushed the index to a negative close. Banks underperformed this time with the 3.59% drop in their sector index. Selective non-financials like BIMAS, ULKER, EREGL, VESTL, and Sisecam stocks caught some bids while PGSUS, SAHOL, TUPRS, FROTO, TOASO, and DOAS were among the weakest spots. We are looking at another negative open for the BIST as the ECB stimulus package announced last night as well as other moves by Central Banks and governments around the world are failing to help the risk appetite. Lira is weaker vs the greenback that is gaining vs all assets and the USDTRY pair is at 6.4975 vs 6.4780 at yesterday's closing bell. U.S. futures are down more than 4% and Asian markets are almost all trading deep in the negative territory.
Macro and Political News:
(+) Turkey unveils 100 billion liras of aid package to combat coronavirus damage… President Erdogan has announced an aid package of TRY100bn (about USD15.4bn) to help overcome the effects of a coronavirus outbreak. Erdogan said Turkey’s top priority is that production and employment do not get interrupted. In that respect, Erdogan said that the government will launch a package that will be a shield for the Turkish economy. Erdogan added that with a package, the government will be unveiling a total of TRY100bn to reduce the effects of the COVID-19 outbreak. The president’s remarks came during a press conference after an emergency meeting convened to coordinate the fight against COVID-19.
• He announced a series of measures including tax cuts for businesses, the private sector, help for low-income households, the retired and the elderly. According to the package,
• The value-added tax on domestic airline transports has been cut to 1%from 18% for three months.
• Credit payments for firms affected by the coronavirus have been delayed for three months. There will be additional support for these firms.
• Social security premiums and value-added tax deductions have been postponed for six months across various sectors, including retail, malls, iron-steel, automotive, logistic and textile.
• Accommodation tax for hotels will be postponed to November.
• In order to maintain capacity utilization rates, the government has decided to extend financial support to stocks for exporters.
• The government doubled the credit guarantee fund's limit to TRY50bn (USD7.70 bn), up from TRY25bn (USD3.35bn).
• The government will provide a total of TRY2bn cash aid to low income groups
• Minimum retiree salary will be hiked to TRY1500 from TRY1000. Bonus payments for retirees will be made early April.
While announcing the financial precautions the government took to tackle the coronavirus’ effects, Erdogan also urged citizens to keep contact with the outside world at a minimum. He stressed out that none of citizens must leave their homes or get in contact with anyone, unless absolutely necessary until the threat disappears. Also, Erdogan urged employers to encourage flexible and remote working models to stem the spread of the virus.

(-) Turkey confirms 191st coronavirus case, up by 93… Health Minister Fahrettin Koca said that total coronavirus case increased to 191 from 98 a day ago and two people have been dead from the coronavirus.

Sector and Company News:

(=/+) DOAS Doğuş Otomotiv authorized Yapı Kredi Bank (YKBNK) to provide a loan in the amount of c. TL780mn (equivalent of EUR110mn) with a 6-year maturity. According to the mandate letter, YKBNK will be the consortium leader of loan provider banks. The loan will be used for NWC requirements and current short-term borrowing’s repayments. In addition, dividends from Tuvturk will be used as collateral in the maturity period. Recall that, DOAS has c. EUR250mn of borrowings (TL based) corresponding 3.0x Net Debt/EBITDA ratio according to its 4Q19 financials and c. 90% its borrowing are short-term based. We expect such a long term restructuring of current short-term borrowings coupled with the improvement in NWC management to have a positive impact on company’s cash-flow. Also note that interest rate of the new loan will be significantly lower than the current borrowings. (Current: 18-25% - Our estimate for the new loan: 11-15%).

ENKAI bought 397k lots of its own shares with TL5.66-5.71 price range per share.

(=/+) HALKB decided to increase its existing buyback programme to TL750mn from TL450mn previously and the maximum amount of shares to 120mn (9.6% of paid-in-capital) from 70mn (5.6% of paid-in-capital). The lender has so far bought back 53.98mn own shares of which 1.5mn were sold in the market.

(-) FROTO is to halt production for two weeks starting from March 20 at Golcuk Custom line and from 23 March at Golcuk Transit line, Yenikoy and EskiÅŸehir (Trucks) Factories.

(-) MAVI Due to the outbreak of coronavirus the Company announced it would close franchise and own stores in Turkey starting from March 19, and all of its retail shops in Germany and Canada, temporarily.