Turkey Wake up call: Macro, Political and Equity News, 31st March

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 inched down 0.07% yesterday after a relatively eventless day. Index opened on a downtick and touched its intraday low of 86.8k in early trades before recovering back to neutral. Rest of the day saw range trading and a close with barely any change from the previous day. Banks fared better on continued strength of GARAN as well as some gains in the two state lenders. ENJSA, Sisecam subsidiaries, TTKOM, EREGL, and SASA also caught some bids while aviation industry names, TUPRS, SAHOL, KCHOL, MAVI, and FROTO were among the weakest blue-chips. Today, our local macro agenda showcases the February'20 Foreign Trade numbers due at 10AM local time. Bloomberg consensus for monthly deficit at USD3.05bn vs preliminary data released earlier by the Ministry of Customs & Trade indicating a USD3.00bn (+72.9% yoy) trade gap for the month. We anticipate a slight positive open for the BIST given 1.6-1.8% overnight gains in U.S. markets after the time we left while Lira is flattish around 6.5840 mark vs the USD.
Macro and Political News:
(=) Turkey launches national campaign against COVID-19… President Erdogan on Monday announced a nationwide fundraising campaign to help citizens financially affected by the coronavirus pandemic. Erdogan said he was donating his seven months of his salary as a way to kick start the fundraiser and added that several ministers have already joined as well. He underscored that the government’s goal is to help those financially struggling, especially daily wage workers, due to the precautions taken against the outbreak. The president also called on all lawmakers, mayors and bureaucrats to contribute to the campaign. He also urged citizens planning to donate during the Muslim holy month of Ramadan to do so in advance. Speaking about precautions against the COVID-19 pandemic, Erdogan said Turkey was among of the most prepared countries. The president announced a new city hospital with 600 bed capacity in Istanbul’s Okmeydanı district was opened as of Monday. Erdogan reiterated that Turkey will continue taking any necessary precautions to preserve our health and safety, while urging all citizens to practice social distancing and avoid going outside their homes. On a separate note, the number of people diagnosed with COVID-19 in Turkey has increased to 10,827 on Monday, while the death toll has reached 168, according to the Health Ministry
(+) IMF: Turkey not seeking financial help amid coronavirus… IMF said that excluding Turkey and Russia, most of 9 non-EU emerging economies seek funding for pandemic response. The underscored that most of the nine non-EU emerging economies in central and eastern Europe – excluding Russia and Turkey – are seeking IMF emergency funding from a USD50bn pool available in rapidly disbursing programs for coronavirus responses. The IMF’s main regional concern was with smaller countries outside the European Union, where the lack of depth of financial markets and limited access to external capital will make it difficult to finance large increases in their fiscal deficits.
(-) Moody’s: Turkish economy will be hardest hit by virus among G20… Turkey’s economic outlook has been revised downwards by the international rating agency Moody’s amid warnings that the country faces a major shock from the coronavirus pandemic. In this regard, Moody’s said that it expects Turkey’s economy to be hit hardest. The agency said that the Turkish tourism sector, which accounts for about 13% of the country’s USD753bn economy, will be badly hit by domestic travel restrictions and falling demand because of the outbreak. In its “Global Macro Outlook” report for 2020-21, Moody’s said that it expects Turkey’s (B1 negative) economy to be hit hardest, with a cumulative contraction in second- and third-quarter gross domestic product (GDP) of about 7%. The shock will likely take a large toll on Turkey’s tourism-related sectors through the summer. Recall, in its previous report for 2019, Moody’s kept Turkey’s credit rating at B1 with a negative outlook.
Turkey’s tourist industry employs about 1 million people, and experts warn that the coronavirus pandemic will weigh heavily on the sector with restrictions on commercial flights and holiday cancelations. While Moody’s painted a gloomy picture concerning Turkey’s economic outlook, Treasury and Finance Minister Berat Albayrak said that he remains optimistic the country will meet its 5% growth target. Recall, Turkey last week announced USD15bn fiscal stimulus plan focused entirely on the business sector in the wake of the coronavirus outbreak.
(=/+) Turkish polyester-producing firm increases capacity to meet coronavirus-aggravated demand… Turkish company based in the province of Adana in southern Turkey that produces 700,000 tons of polyester annually, mostly for the health and hygiene sectors, has increased its orders by 20% amid the growing need for its products due to the coronavirus pandemic. Some 60% of the SASA Polyester Industry’s manufactured goods are used in health, hygiene and packaging products. The company’s general manager, Irfan Baskir, told state-run Anadolu Agency that this rate had increased considerably due to the effect of the recent COVID-19 outbreak. He said the company have received additional orders due to the pandemic, with an increase of approximately 20% from both our domestic and international customers. Mr Baskir noted that 2019 had been a year in which previously planned investments had been gradually introduced.
With the series of investment moves and the commissioning of polyester fiber facility investments, the company’s polyester production capacity had already increased from 350,000 tons to 700,000 tons annually. This capacity was set to reach 1.4 million tons in May in line with the second phase of investments and in June with the third phase.
(=/+) Vehicle registration up 56.2% in February… The number of registered vehicle on Turkey’s roads increased 56.2% year-on-year in February 2020. A total of 128,648 first- and second-hand vehicles were registered in the first month of the year, according to the Turkish Statistics Institute. Motor vehicle registration in the country decreased by 43.8% in January since the previous month. The total number of road motor vehicles registered by the end of February was nearly 23.3. Out of the total vehicles in Turkey, automobiles enjoyed the lion’s share with 60.3% of new registrations, and motorcycles accounted for 15.2%. Small trucks came in third at 13.9% and tractors followed at 5.9%. Trucks represented 2.3% of new vehicles, minibuses 1.1%, buses 1 percent and special-purpose vehicles 0.3%. In terms of the distribution of model brands for newly registered cars, Renault recorded 15.6%, Fiat, 11.9%, Volkswagen 8.3%, Toyota 8.1%, Peugeot 6.4%, Dacia 5.7%, Skoda 5%, and Honda 4.4%. The number of vehicles registered in January and February this year stands at 147,675, higher than the 100,511 registered during the corresponding two-month period in 2019.

Sector and Company News:
(=/+) ASELS signed USD51mn and TL449mn contracts with Presidency of Defence Industries. The deliveries will take place between 2020-2023. Considering ASELS’s backlog of 9.7bn, we believe that fresh additions will have a slightly positive impact to its backlog.

(=) Three public banks of Turkey, Ziraat Bankasi (unlisted), VakifBank (VAKBN TI) and Halk Bankasi (HALKB TI) announced a support program for families whose monthly income below TRY5.0k as for Covid-19 outbreak. Accordingly, the maturity of the loans will be 36 months with 6 months grace period. The amount of loans will be TRY5k, 7.5k or 10k and the rest of 30 months, the instalments will be TRY188, TRY282 and TRY376 respectively. If an individual is unable to provide with a collateral, credit guarantee fund will be utilized.

Like the previous ones, this loan program also is likely to adversely affect public banks’ cash flows as well as it can be evaluated as a macroeconomic support to the overall economy.

(=) ISCTR bought 625k lots of SISE shares with TRY3.92 – 3.97 price range per share. Its share in SISE reached to 67.61% by this transaction.

(=) TAVHL bought back 125k of its own shares at an average share price of TL15.63.

(=) GARAN 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.

(=) EKGYO obtained a refinancing loan amounting TRY175mn.

(-) FROTO expanded its previous decision to halt production until April 13, 2020. Recall that the Company had decided to halt production for two weeks starting from March 20.

(=) ARCLK S&P reduced the credit rating of Arcelik to "BB" due to negative impact of COVID-19 and confirmed its outlook as "negative".

(=) MGROS has reached an agreement with the trade union. According to the agreement, the gross wages will increase by 14% to 19% in the first year. In the second and third years, the increase will be determined according to the annual CPI rate announced by TURKSTAT.

(+) ARCLK Selcuk Bayraktar, Chairman of the Board of Turkey Technology Foundation, announced that ARCLK manufactured the prototype of the ventilator designed by “Biosys”. ASELS and Baykar Savunma engineers also supported the production of prototype process.

27.03.2020

(=) SISE bought 4mn lots of TRKCM shares with TRY2.63 – 2.71 price range per share. Its share in TRKCM reached to 70.67% by this transaction.

(=) SISE bought 2.3mn lots of ANACM shares with TRY2.73 – 2.77 price range per share. Its share in ANACM reached to 77.57% by this transaction.

(=) SISE bought 2.0mn lots of SODA shares with TRY4.76 – 4.87 price range per share. Its share in SODA reached to 62.22% by this transaction.

30.03.2020

(=) SISE bought 3.2mn lots of TRKCM shares with TRY2.62 – 2.75 price range per share. Its share in TRKCM reached to 70.92% by this transaction.

(=) SISE bought 1.7mn lots of ANACM shares with TRY2.78 – 2.85 price range per share. Its share in ANACM reached to 77.80% by this transaction.

(=) SISE bought 3.2mn lots of SODA shares with TRY4.81 – 4.95 price range per share. Its share in SODA reached to 62.54% by this transaction.