Turkey Wake up call: Macro, Political and Equity News, 28th May

BIST jumped 1.87% yesterday as Turkish stocks played catch up with global peers that had a decent run during our Eid holiday. After a small positive start that marked its lowest point for the day, benchmark BIST100 jumped 1,200 points to 105k mark in early trades, followed by moves within 104.5-105.5k range for the rest of the day. Banks that seemed to come under further selling pressure from foreign institutional investors in the morning caught some bids in the afternoon while still underperforming the broader market with the 1.17% gain in their sector index. Aviation stocks led by THYAO, PGSUS, and TAVHL as well as CCOLA, AEFES, ARCLK, EKGYO, TUPRS, FROTO, KCHOL, ASELS, and ENKAI supported the headline index while TCELL, BIMAS, SELEC, ALKIM, and KOZAA were among the rare decliners in the BIST100 space. Today, our macro agenda involves TurkStat's May’20 Economic Confidence Index due at 10AM local time. The index had plunged 44.1% on a sequential basis to an all-time low of 51.3 in April as the virus pandemic depressed all sectors of the economy. We anticipate a positive open for the BIST given the overnight 1.6-1.7% jump in U.S. markets while the slight weakness in lira (USDTRY at 6.7851 vs 6.7740 at yesterday's closing bell) may create some headwinds. U.S. futures are up 0.4% in early trades while Asian markets present a mixed bag with gains in Japan vs losses in Chinese benchmarks.
Macro and Political News:
(=) Treasury and Finance Minister’s statements… On a TV program on Wednesday, the Treasury and Finance Minister Berat Albayrak stated that he is expecting a positive growth in 2020 despite the Covid-19 pandemic effects. He also announced a new credit support program to be released soon in order to stimulate the domestic demand. Additionally he stated that the mortgage loans part of the support program will be long term and significantly with lower costs.

Sector and Company News:

(-) TRKCM decided to move its TR5th production line’s cold repair to earlier (from Mar21 to Jun20) due to low demand in architecture glass. Although we find it reasonable to make it at a time when the demand is low, we interpret it as a short-term negative development as it increases the size of the expected damage on the 2020E financials.

(=/+) YKBNK announced that the syndicated loan agreement that was declared on May 15 amounting USD780mn increased to USD870mn with new participations.

(=/-) THYAO posted TL2bn net loss in 1Q20, compared to TL1.3bn net loss in 1Q19. THYAO’s 1Q net loss was also below our estimate of TL1.3bn and the consensus of TL1.5bn.