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

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Wake – up call

BIST added 0.39% on Friday aftera volatile day, carrying its weekly cumulative gains to 2.37%. Propped up by the gains in global markets, index had a strong start on Friday and hopped above 121.8k in early trades. But the gains were reversed and the benchmark BIST100 traded in a 1,000-pointrange with ups and downs for the rest of the day. Banks performed in line with the broader market as their sector gauge climbed 0.40% thanks to gains in YKBNK and VAKBN making up for the profit-taking in AKBNK and GARAN. KCHOL, EREGL, TOASO, YATAS, MAVI,and CCOLA stood out as outperformers of non-banks while PGSUS, TUPRS, TKFEN, ULKER, and TCELL were among the laggards. Coming to this morning, our local macro agenda is muted and eyes will be on peer markets for a sense of direction. We accordingly anticipateBIST to have a flattish start to the day as U.S. futures are almost unchanged and Asian indices have a slight positive bias while the ascent in crude oil benchmarks on Iraq and Libya supply concerns may create some headwinds for Turkish stocks. Lira is atad weaker as USDTRY pair is around 5.8939 in early trades vs 5.8902 at Friday’s closing bell.
Macro and Political News:
(=/+) Leaders agree to uphold UN arms embargo and end military support in Libya… Participants of the Berlin conference on the crisis in Libya have agreed to uphold a U.N. arms embargo and end military support for warring factions. German Chancellor AngelaMerkel held a news conference following the conclusion of the conference late Sunday. Merkel said they have received commitments from all of the participants not to give any further support to these warring parties so that the U.N. arms embargo is respectedand the truce holds. She said the leaders had agreed upon a detailed plan for the country. Sources cited that the agreement was not officially signed by the parties, but verbally agreed upon. Merkel also noted that Turkey said it will not send additional weaponryor ammunition to Libya during this process. Merkel clarified that Haftar and GNA Prime Minister Fayez al-Sarraj were not in the same room during the talks in Berlin, but were spoken to separately. They did not directly participate in the conference, she said.
(=) Erdogan: Turkey will remain in Syria until calm restored, could even move further… President Erdogan said over the weekend that Turkey will remain in Syria and could even move further into the country until calm for can be provided for the country’s southernborder and its brothers living there. Erdogan said Turkey now considers the security of its southern border, adding that they are determined to use all means of politics, diplomacy and military power in issues concerning Syria, the Mediterranean and Libya.In this regard, Erdogan warned Europe that it could face new threats if it fails to back Libya’s U.N.-recognized government, the Government of National Accord (GNA). He underscored that EU’s potential failure to adequately the GNA would be a betrayal of itsown core values, including democracy and human rights. Erdogan urged that Europe would encounter a fresh set of problems and threats if Libya’s legitimate government were to fall. He went on the say that: “The obvious choice for Europe is to work with Turkey” as it is not much interested in providing military support to Libya. Erdogan reiterated that Turkey will train Libya's security forces and help them fight terrorism, human trafficking and other grave threats against global security.
(=) Erdogan and Merkel held phone talks on Libya… President Erdogan and German Chancellor Angela Merkel held a phone conversation on Saturday, according to Turkey’s Communications Directorate. The two leaders discussedLibya and other regional issues, said a directorate statement. The conversation came on the eve of Sunday’s Berlin conference on Libya, set to seek a stronger commitment from regional actors for a cease-fire between Libya’s internationally recognized governmentand forces loyal to Libyan warlord Khalifa Haftar.
(+) German Chancellor Merkel to visit Turkey on Friday… German Chancellor Angela Merkel will visit Turkey next week to discuss bilateral relations and international issues. Steffen Seibert, the German government spokespersonsaid Merkel would visit Istanbul on January 24 for talks with Turkish President Erdogan. The topics of the meeting will be the current international and bilateral issues.
(+) Turkey and Berlin talks to discuss Libya’s peace and stability… Turkey will exchange views to establish peace and stability in Libya at the conference to be held in Germany on Sunday, an official statement said on Saturday. Turkey’sDirectorate of Communications said in a statement: “It is envisaged that the views will be exchanged with regard to the steps required to be taken in order to establish peace and stability in Libya in the coming period and that the concrete steps will be takentowards this end at the summit”. To remind, Turkey has supported the efforts to stop attacks to Libya’s UN-recognized Government of National Accord (GNA), to establish a permanent cease-fire, and to find political solutions in Libya.
Germany is set to host a major peace conference on Libya that will seek a stronger commitment from regional actors for a cease-fire in the war-torn country to pave the way for a politicalsolution. Chancellor Angela Merkel invited leaders from Turkey, Russia, the U.S., China, France, the U.K. and other regional actors to a single-day conference in Berlin, amid a fragile cease-fire between Libya’s internationally recognized government and forcesloyal to Libyan warlord Khalifa Haftar. The statement confirmed that President Erdogan would attend the summit.
(=) New list of parties eligible to participate in Turkish elections announced… Turkey’sSupreme Election Council (YSK) has announced the list of parties eligible to participate in a possible upcoming election. According to the YSK’s declaration, there are currently 15 political parties that are eligible to take part in an election in Turkey.However, some parties like the newly established Future Party (GP), founded by ruling Justice and Development (AK) Party former Prime Minister Ahmet Davutoglu, does not meet the necessary conditions to participate in a possible election.
Parties which have organized their general assembly six months prior to the second week of January 2020 and those which have established their party organization in at least half ofthe 81 Turkish provinces will be provided with an electoral roll. The GP was founded on Dec. 13 by Davutoglu in opposition to President Erdogan’s administration. The new party immediately published a list of 154 founding members which included some formerAK Party officials and affiliates.
(=/+) The CBRT delivered new adjustments to reserve requirements… The CBRT announced a couple of changes for reserve requirements in order to strengthen the monetary transmission mechanism, support financial stability and bring out goldsavings into the economy. Within the scope of Reserve Option Mechanism, the upper limit of the facility of holding standard gold has been decreased from 30% to 20% of TRY reserve requirements. Also, the upper limit of the facility of holding standard goldconverted from scrap gold collected from residents has been increased from 10% to 15% of TRY reserve requirements.
By decreasing the upper limit of the facility of holding standard gold from 30% to 20% of TRY reserve requirements, USD 1.7bn equivalent of liquidity in terms of gold will be providedto the market, while TRY4.5bn liquidity will be withdrawn from the market. By increasing the upper limit of the facility of holding standard gold converted from scrap gold collected from residents from 10% to 15% of TRY reserve requirements, USD0.3bn equivalentof liquidity in terms of gold will be withdrawn from the market, whereas TRY2.0bn liquidity will be provided to the market. However, the obligation to collect the scrap gold from residents will cause the effects appear gradually.
(=/+) CBRT Reserves improved… In the week ending January 10th, the CBRT’s gross reserves (inc. gold) increased by about USD0.8bn compared to previous week, to some USD106.2bn. FX reserves increased bysome USD0.3bn, while the gold reserves increased by USD0.5bn. In year-to-date (YTD) terms, total reserves fell by nearly USD0.1bn, on the back of FX reserves decreasing by USD3.0bn and gold reserves rising by USD2.9bn.
(=) Short-term foreign debt stock reached USD114.6bn… Turkey’s short-term external debt stock amounted to USD114.6bn as of the end of November 2019. The external debt stock - maturing within one year or less - rose by 1% inNovember, compared to the end of 2018. The currency breakdown of the debt stock composed of 50.4% U.S. dollars, 29.7% euro, 13.8% Turkish lira and 6.1% other currencies. Specifically, in this period, banks’ short-term external debt stock decreased by 2.4%to USD55.8bn and other sectors’ short-term external debt stock increased by 4.0% to USD52.4bn. The rest of the amount - some USD6.4bn - belonged to the CBRT.
From the borrowers side, the short-term debt of public sector, which consists of public banks, totalled at USD21.7bn in November last year, decreasing 3.3% from the end of previousyear, while the private sector saw a 1.6% rise to reach USD86.5bn. The bank stressed that short-term foreign exchange (FX) loans of the banks received from abroad slipped 30.6% to USD7.7bn. Last but not the least, according to CBRT's closely monitored shortterm debt data by remaining days to maturity, short-term external debt stock was USD164.2bn in November (October: USD167.4bn).
(+) Home prices rose 7% in November… The residential price index increased by 7.2 percent in November 2019 from the same month of the previous year. On a monthly basis house prices across Turkey rose by 1.09%in the month versus the 0.78% increase recorded in October 2018. The price index for new dwellings exhibited a 10.4% increase on an annual basis in November while the index for existing units increased 7% from a year earlier. In Istanbul, the country’s mostpopulous city, house prices rose by 1.3% rise in November last year from a year earlier while the property market in the capital Ankara saw an annual increase of 6.5% in house prices. In İzmir, Turkey’s third-largest city, prices were up 7.5%.
(=) Turkey’s competition authority launched preliminary investigation on 20 banks… The Competition Authority (RK) launched a preliminary investigation on over 20 banks operating in Turkey, including domestic and national institutions over alleged violationsof competition regulations, according to reports late Jan 17. The RK is reportedly investigating whether the banks are violating relevant laws in the deposit, exchange and intermediary services. The names of the banks have not been announced. There are 53banks in Turkey according to data published by the Banking Regulation and Supervision Agency (BRSA) as of September 2019.
(=) Renewable tenders call set for February… Turkey plans to announce new mini Renewable Energy Resources Zone (YEKA) tenders in February. Energy and Natural Resources Minister Fatih Donmez said that the launch ofnew solar energy tenders in a new form, called mini YEKA tenders, are planned for nearly 40 provinces in Turkey with capacities ranging from 10 to 50 megawatts. However, the minister explained that before the release of the tenders, a legal amendment for theirimplementation needs to be enforced, adding that discussions on this topic in the Turkish Assembly will be held after which the tenders will be announced in February and held in April or May.
In the country’s bid to expand renewable energy deployment, Donmez said that rooftop solar energy applications with a potential capacity of between 4,000 and 5,000 megawatts will berealized. There has been much interest both from the industrial and residential sectors for rooftop solar. Mr Dönmez noted that the Ministry received applications for rooftop solar energy from almost 900 industrial facilities reaching a total amount of morethan 800 megawatts.
Sector and Company News:

(=/+) TOASO PSA Turkey General Manager, Olivier Cornuailh said the Company forecasts 600k units of Turkish Automotive Market in 2020. "Tofas's Bursa plant is very important. New opportunities for Tofas may arise following the merge"he also said.

(=) MPARK Schroders Plc. bought 152k lots of MPARK shares with an average price of 16.04TL per share. Following the transaction, Schroders has 5.048% of company shares.