Turkey Wake up call: Macro, Political and Equity News, 20th May

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Wake – up call

BIST jumped 2.22% on Monday before yesterday's market holiday as the positive mood on rising hopes for a vaccine for the coronavirus lifted all boats in global markets. After a slight positive open that marked the lowest point for the day, BIST100 turned north and gradually ascended until the close with short-lived rounds of profit-taking. The benchmark managed to close just 200 points shy of its intra-day peak. Banks again underperformed, shackling the broader market with the 0.72% gain in their sector index. The 10% surge in BIMAS accounted for almost 40% of the point gains in the headline index and found some support from the likes of TCELL, EKGYO, SAHOL, automakers, ENJSA, ULKER, aviation plays, and Oyak Group cement stocks (ahead of their merger tomorrow). On the other hand, TUPRS, ALKIM, Koza Group stocks, KRDMD, and TTRAK were among the rare decliners. Coming to this morning, our local macro agenda involves May'20 Consumer Confidence Index compiled by TurkStat due 10AM local. The index had plunged 5.8% on a sequential basis to 54.9 in April, the lowest in the series that dates back to 2005 as the virus pandemic had depressed the sentiment. BIST seems off to a slight positive start given gains in lira (USDTRY at 6.7909 vs 6.8842 at Monday's close) on unconfirmed press reports suggesting imminent swap deals with the central banks of Japan and the U.K. U.S. futures are up c.0.5% in early trades in partial reversal of their 0.9-1.2% losses during the time we were closed and Asian markets present a mixed picture.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 4199... According to the Health Ministry, the number of deaths from coronavirus increased by 28 people yesterday and reached 4199. The total numbers of tested and infected people are 1.67mn and 151,615 respectively.

(=) Private Sector's Outstanding Loans Received From Abroad - March 2020... According to the data released by the Central Bank of Turkey, the long-term of private sector’s outstanding loans received from abroad recorded USD177.6bn in March 2020, decreasing by USD3.0bn while short-term loans (excluding trade credits) realized USD7.8bn, decreasing by USD1.2bn compared to YE19. From the borrower’s side, regarding long-term loans, banks’ loan liabilities decreased by USD1.1bn; whereas bond liabilities amounted to USD21.3bn, increasing by USD100mn in comparison to the end of 2019. In the same period, non-bank financial institutions’ loan liabilities decreased by USD736mn; whereas bond liabilities amounted to USD3.6bn, decreasing by USD123mn. Non-financial institutions’ loan liabilities recorded a decrease of USD861mn when compared with YE19, while bond liabilities amounted to USD7.5bn, decreasing by USD4mn. Regarding short-term loans, banks’ loan liabilities realized as USD4.7bn, decreasing by USD941mn; whereas non-financial institutions’ loan liabilities realized as USD1.6bn, decreasing by USD102mn in comparison to the end of 2019.

(=) Custom tax hike for some products… According the Official Gazette, custom tax for some imported products have been hiked to 30% until September, then the custom tax for those products will decline to 10%. Main categories for imported products are; Marbles, chemical products, plastic and rubber products, car tyre, leather, wood and furniture, recycling paper and cardboard, textile products, glass products, ceramic products, steel products, aluminum products, TV receivers, machines and equipments, vehicle parts, optical equipments.


Sector and Company News:

(=) PGSUS CEO Mehmet Nane stated that they plan to kick off the domestic flights at the end of May, with the approval of Ministry. He also said that the Government supported the aviation industry through deferral of taxes, reducing the taxes to some extent and short term working payments, in those tough days. He expects an increase in the ethnic turism and leasure trips but decline in business trips for a certain period.

(=/-) Fitch, the credit rating agency downgraded HALKB from “B+” to “B” and kept its negative outlook. On the other hand, the outlook of GARAN,VAKBN and Ziraat Bankasi downgraded to negative from neutral due to the weak FX position of the country and the regulations to the banking sector.. Additionally, the agency confirmed the AKBNK, ISCTR, YKBNK, VAKBN and Ziraat ratings as “B+ “.

(-) Department for International Trade of United Kingdom said in a statement on May 19,2020, The U.K. set out its tariffs plan for global trade (replacing the EU’s external tariffs) when it fully leaves the EU at the end 2020. According to the announcement UK is cutting import duties on many products including white goods and kitchen equipment to zero, while protecting industries such as automotive, agriculture, ceramics and fishing. In this context, UK will maintain its +10% and +16% tariff on vehicles. The legislation will come into force from Jan21. We believe that it may be potentially positive for white goods manufacturers in Turkey (ARCLK, VESTL, VESBE and SILVR in the long term) and potentially negative for FROTO.

(=) According to the data released by TurkStat, floor area of buildings given construction permits given by municipalities decreased by 11.4% YoY from 20mn sqm to 17mn sqm. Majority of the given construction permits were used for residential areas which is 50.7% of total areas while 66.3% of the residential areas are used for two and more dwelling buildings.

To remind, total house sales in 1Q20 increased by 24% YoY from 256.4k to 318.4k. Combining the data given above; in the first quarter of the year, the total residential stock is expected to erode slightly