Turkey Wake up call: Macro, Political and Equity News, 20th 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 climbed 2.01% on Friday, carrying its weekly gains to 1.77%. After a gap higher open around 98.3k, BIST100 climbed to 98.8k around midday, followed by some profit-taking in the afternoon. Banks slightly outperformed with the 2.24% gain in their sector index. EREGL, aviation stocks, automotive companies, ENKAI, and Sisecam Group names were among the top gainers of non-financials while foodstuff stocks, SELEC, and Koza Group names stood out as laggards. Coming to start of the new week, our macro agenda for the day is muted. BIST seems off to a sideways start given mixed signals from global markets. Lira is a bit weaker with USDTRY at 6.9423 in early trades vs 6.9240 at Friday's closing bell. U.S. futures are down c.0.5% in partial reversal of the 1.1-1.3% overnight gains after the time we closed on Friday evening while Asian equity benchmarks present a mixed bag.
Macro and Political News:
(=) President Erdogan spoke with Trump on the phone... According to the press release by the Turkish presidency’s office on Sunday, two leaders agreed to continue their “close cooperation” against the threats posed by the coronavirus on public health and the economy.

(=/+) Swap negotiations continue with Central Banks... In an interview with Anadolu Agency, the Governor Murat Uysal stated that The Central Bank of Turkey is still in contact with its global counterparts to in order to open swap lines. The Governor also underlined that the Central Bank expects recovery in the second half of the year following weak quarter in 2Q20, once daily life, businesses back to normal.

(=/-) Central Bank released survey of expectations... According to the survey of expectations report for April 2020, the GDP growth for the current year is -0.6% and 4.6% for 2021E. The CPI for 2020-end averaged at 9.76% and 9.70 for the next 12 month. The USDTRY for the end of 2020 is expected 6.9277. The current account deficit to GDP for 2020 and 2021 is expected at USD6.1bn and USD15.3bn, respectively.

(=/+) Central Bank increased OMO limits... On Friday, the Central Bank announced increasing the share of open market operations to its total assets to 10% from 5%. The Central Bank aims to strenghten the moneraty policy transfer mechanism and support the market making system.

(=) Custom tax for steel products temporarily increased... According to the Presidential Decree published in the Official Gazette, custom tax of some steel products have been raised by 5pp until mid-July.


Sector and Company News:

(=) PGSUS shares will be trading under gross settlement starting from April 20th until May 4th.

(=) Serra Sabanci sold her 382k lots of CIMSA shares between TL 7.05-7.08 share prices. Following the disposal, she has no CIMSA shares left.

(=) Serra Sabancı sold her 32.8mn lots of AKBNK shares TL5.81 price per share. Her shareholding status has not changed after this transaction.

(=) SISE bought 2.1mn lots of TRKCM shares with TRY3.33 – 3.39 price range per share. Its share in TRKCM reached to 71.76% by this transaction.

(=) SISE bought 1.2mn lots of ANACM shares with TRY3.48 – 3.50 price range per share. Its share in ANACM reached to 78.13% by this transaction.

(=) SISE bought 0.5mn lots of SODA shares with TRY5.69 – 5.72 price range per share. Its share in SODA reached to 62.94% by this transaction.

(=) SOKM, a fire occurred in the Mersin warehouse on Sunday. There was no injury in the incident. There will not be service disruption in the stores that receive the products from Mersin warehouse. In addition, the Company mentioned that all the warehouses of the Company are covered by insurance policies, thus no financial loss is expected.

(=/-) BRSA announced a new asset ratio for banking sector on Saturday as follows:

Asset Ratio = Loans + (Securities*0.75) + (Swap with CBRT * 0.5)
TRY Deposits + (FX Deposits*1.25)

According to new formula, the deposit banks will not be able to remain below %100 and for participation banks this limit has been 80%. By this regulation BRSA aims to i) realize an expansion in total loans, ii) lead the banks to buy more domestic bonds (preferably treasury notes) and iii) having higher volumes of swap transactions with CBRT instead of foreign money markets. According to the latest banking sector data released on last Thursday, the current situation as of April 10 is as follows:

Exhibit: Segmental breakdown of banking sector asset/liabilities
(Bn, TL) Private Public Participation Total Banking Sector
Loans 1,434 1,113 166 2,938
Securities 351 332 60 743
TRY Deposits 693 594 104 1,391
FX Deposits 876 445 147 1,469
Swap with CBRT (Est) 85 70 15 170
Asset ratio 97% 121% 76% 111%
100% 100%
Source: BRSA weekly banking data


Swaps with CBRT segment has been calculated by under the assumption of banks are having 30% of their total swap transactions with CBRT. As it can be seen from the table above, private banks are 3 ppt and participation banks are 4 ppt below the new requirement.

In order to comply with the ratio above, banks will either increase their assets which is on the nominator or decrease their liabilities which is located on the denominator of the formula in addition to have a third path as using a combination of those two options. The new regulation will be effective by the beginning of May, 2020.