Turkey Wake up call: Macro, Political and Equity News, 30th March

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Wake – up call

BIST dropped 3.72% on Friday in reversal of Thursday's gains and some more, in sync with global peers. After a positive start and attempts to stay above the neutral line in early part of the day, BIST100 index slipped to red after 11:45AM and gradually descended until the close. Banks fared relatively better with the 2.63% decline in their sector index again thanks to the continued buying in GARAN while VAKBN and AKBNK were weaker. PGSUS, DOAS, ECILC, and SASA were among the handful of gainers in the BIST100 space while TCELL, TTKOM, TAVHL, ENJSA, KCHOL, SAHOL, KOZAL, and ASELS topped the blue-chip decliners. Coming to this morning, our local macro agenda involves BRSA's banking industry aggregates for February'20 due at 2PM local time. Cumulative industry profits stood at TL3.28bn in February'19 and at TL7.92bn in January'20. BIST seems off to a cautiously positive open as the U.S. futures are up c.1.4% in early trades while the slide in lira (USDTRY at 6.4925 vs 6.4482 at Friday's closing bell) may create some headwinds. Asian equities are mostly in the red, but up from their early-morning lows.
Macro and Political News:
(=) Turkey tightens measures to fight the COVID-19 outbreak… Turkey has decided to ground all international flights to contain the spread of the coronavirus pandemic. Speaking at a news conference after a meeting of the Science Council, President Erdogan announced several new measures to fight the COVID-19 outbreak. Among the new measures,
• Both private and public sectors will transition to flexible work schedules with minimal staff;
• Picnic spots, forests, and archaeological sites were closed on weekends; pandemic councils will be formed in Turkey's 30 metropolitan municipalities to take additional precautions, wherever necessary;
• Newly drafted soldiers will be subjected to a 14-day quarantine during their admission and dismissal from the army;
• Stalls at local bazaars and marketplaces have to keep at least 3 meters of distance between each other and are not allowed to sell non-essential items, including clothing;
• Food can only be sold in packages.
• In some cities and towns, police officers at checkpoints have started the thermal screening of people arriving from out of town. In a bid to raise awareness, traffic lights in most cities now flash with messages urging people to stay home.
• Those making inter-city travels will be tested for high fever and coughing, with systems set up at entrances and exits of cities; if a trace of illness is found during these checks, all passengers present in the vehicle will be quarantined.
• Inter-city travels are now subject to local authorities' permission and only a well-spaced seating arrangement would be allowed on buses.
• Flexible working hours for the private sector as well, after announcing the same for public workers, to bring the risk for the public to a minimum.
President Erdogan also called on 83 million citizens to implement a voluntary quarantine and to leave their homes only for basic and emergency needs.
(=) Turkish Airlines limits domestic flights… Turkey’s national flag carrier airline on Saturday announced that it would limit domestic flights amid the novel coronavirus outbreak. Turkish Airlines CEO Bilal Eksi said on Twitter that domestic flights from Istanbul Airport and Ankara have been limited to some metropolitan cities as of Saturday 11.59 p.m. Eksi added that cargo flights would continue. Recall, on Friday, Turkey suspended all international flights as part of its measures to curb the spread of COVID-19. As for domestic transportation, travel between cities is subject to local authorities' permission.
(=) Turkish Transport and Infrastructure Minister dismissed… President Erdogan dismissed his Transport and Infrastructure Minister Mehmet Cahit Turhan earlier Saturday. Deputy Minister of Transport and Infrastructure Adil Karaismailoglu was appointed to the post. The decision was announced in the Official Gazette.
(=) The CBRT will use all tools to counter coronavirus impact… The CBRT Governor Murat Uysal said the CBRT will vigorously use all its policy tools to ensure the efficient functioning of financial markets throughout the coronavirus outbreak. Uysal also said the central bank was closely monitoring the impact of the outbreak on the Turkish and global economies, the central bank said on Twitter. On a separate, the Banking Regulation and Supervision Agency (BRSA) Thursday said it has decided to provide flexibility for banks’ liquidity ratio requirements until Dec. 31 due to the outbreak. The banks, which will be temporarily exempt from fulfilling specific liquidity ratio requirements, will continue to report their liquidity coverage ratio and liquidity adequacy ratio to the watchdog.
(=) The CBRT cuts maximum monthly credit card rates… The CBRT said it had revised the maximum interest rate credit card lenders could charge each month to 1.25% for Turkish lira and 1% for foreign exchange transactions. The interest rate where payments are overdue will be a maximum 1.55% for lira charges and 1.30% for transactions in foreign currencies. The revisions will come into effect on April 1. The bank added that the rates will no longer be determined for three-month periods and they will be valid until they are changed.
(=) CB: Turkish economy to be among least damaged by pandemic… The CBRT Deputy Governor Oguzhan Ozbas said over the weekend that he Turkish economy is expected to post a high growth rate in the first quarter of this year due to a strong January and February, stressing it would be one of the economies to see the least damage from the coronavirus outbreak, which is in the process of delivering a global recession. Ozbas told the state-run Anadolu Agency that with its dynamic structure, the Turkish economy will be one of the economies to see the least damage from this process and overcome it in a short period. He added that the Bank has not yet received the significant sign of a weakening in consumption, other than travel expenditures.
(+) Newly inked business agreement to increase Turkey’s exports to US… An agreement has been signed between the American Turkish Business Development Council (ATBDC) and the U.S.-based Turkish American Chamber of Commerce & Industry Northwest (TACCINW) to promote and increase trade between Turkey and the U.S. According to the agreement, Turkey will increase its exports to the U.S. while TACCINW as a private, non-profit membership organization based in Seattle and Washington will promote the services and products in the U.S. by supporting the trade and investment activities of ATBDC members. The agreement also aims to develop joint initiatives and commercial relations between Turkey and Northwest U.S.
By organizing a wide range of services, training programs, seminars and events, TACCINW will provide guidance, information and various tools and resources to help organizations promote their products and services, reach out to potential customers and suppliers, and achieve their business goals.
(=/-) Economic confidence index at 91.8 in March… Turkey’s economic confidence index reached 91.8 in March. The figure was down 5.9% from a month earlier, TurkStat said in a statement, attributing the decrease to a fall in real sector, services and retail trade confidence indices. According to the report, the sub-index for construction showed an improvement, rising 3.7% this month. The consumer confidence index rose 1.7% month-on-month in March. The confidence in real sector deteriorated the most, going down 7.6% during the same period. The services and retail trade confidence indexes declined 6% and 1.2%, respectively from a month earlier in March. The economic confidence index is a composite index that encapsulates consumers' and producers' evaluations, expectations and tendencies about general economic situation.
Sector and Company News:
(=) EKGYO Board decided to propose a cash dividend of TL76.6mn which corresponds to TL0.02 net DPS to be distributed on April 29, 2020, to the approval of the General Assembly. The proposed dividend amount indicates a 1.75% dividend yield.
(=) VAKBN announced the postponement of General Assembly meeting due to Covid-19 outbreak which was supposed to be run in April 2nd, for a future date.
(=) HALKB announced the postponement of General Assembly meeting due to Covid-19 outbreak which was supposed to be run in April 3rd, for a future date

(=) ISCTR bought 500k lots of ISGYO shares with TRY1.21 – 1.22 price range per share. Its share in ISGYO reached to 50.51% by this transaction.

The Banks Association of Turkey New Loan Program for Cheque Payments and General Economic Support… The Banks Association of Turkey (TBB) announced a new loan program for cheque payments and general economic support. Accordingly, to support corporate customers especially SMEs to settle their cheque payments, banks will provide loans according to the revenue size of the company with 3 month grace period, 12 months of instalments in total and 9.5% annual interest rate. The other program for economic support for companies have the same payment conditions in addition to not terminating any employment contracts. For the companies unable to provide with collateral, credit guarantee fund (CGF) will be utilized.
So far, Garanti Bankasi (GARAN TI) and Yapi Kredi Bankasi (YKBNK TI) announced to participate aforementioned loan programs.
Flights from SAW have been cancelled... According to the press release from SAW management, the all international flights from Sabiha Gokcen Airport have been cancelled starting from March 27. Also the domestic flights have been limited for certain routes and THYAO have been authorized to handle the domestic flights from SAW.

LCW and MAVI shut down e-stores... According to the press releases from those companies, their internet stores have been closed for the safety measurements against Covid-19.

(=) EREGL postponed its AGM due to Covid-19 outbreak. Recall that it would be held on March 31 and TL1.2 DPS from 2019 earnings would be discussed in AGM.

(=) ASELS postponed its AGM. Recall that it would be held on April 3 and TL0.29 DPS from 2019 earnings would be discussed in AGM.
BRSA update for minimum payment for credit cards… BRSA updated the minimum payment rate for credit cards. Accordingly, banks will not be having flexibility to determine the minimum monthly payment for credit cards below the minimum limit that BRSA defined. Additionally, the interest rates that can be applied to credit cards and delayed payments have been updated from 1.84% to 1.25% and from 2.34% to 1.55% respectively for Turkish lira. For FX credit card payments , the rates updated from 1.47% to 1.00% and from 1.97% to 1.30% penalty for delayed payments.
BRSA announcements for GPL and vehicle loans postponements and Stage II loan classification duration… BRSA announced that for the 3 months postponement request for the GPL and vehicle loans instalments, the original maturity will not be the limit. Even it is the last instalment, it will still be delayed for 3 months.
Additionally, the board announced forbearance for Stage II loan classification duration from 30 days to 90 days until the end of 2020. This is expected to support the banks’ expected credit loss provision requirements.