Page 81 - TURKRptMay19

down by 1.1% d/d to TRY8.06 as of 14:00 local time while the benchmark BIST-100 index on the Istanbul bourse was up 0.07% to 94,851. The annual loss on Garanti shares stood at 12% versus a 4% y/y rise on the BIST-100.
8.2 Central Bank policy rate
Turkish lira subsides further after central bank issues less hawkish rates advice. Turkey’s central bank stuck with its benchmark interest rate of 24% on April 25 as anticipated. However, the Turkish lira (TRY) depreciated sharply in the wake of the announcement. It was seen as less hawkish than desired because the rate-setters dropped “monetary policy would be tightened further if it became necessary” along with “contribution of fiscal policy to rebalancing process” in their accompanying statement. The TRY climbed into the 5.98s against the USD following the announced policy decision.
Market ‘not willing to commit to Turkey’. The market is not really willing to commit to Turkey at this stage until two issues—whether or not the Istanbul election lost by the ruling party will be rerun and Turkey’s stubborn insistence that it will acquire the S-400 missile defence system from Russia despite US and Nato opposition—are cleared up, according to Tim Ash of Bluebay Asset Management. “This is much worse than expected and supports the view that policy has gone off the rails... This signals that any orthodoxy at the central bank has effectively been crushed, since no sane central bank would be leaning dovish at a time like this for Turkey,” Win Thin of Brown Brothers told Bloomberg. “Clearly the market is disappointed... It seems that the central bank completely overlooked the recent lira depreciation and instead of strengthening its hawkish message to provide the battered currency with some support, the overall message embedded in the statement is less hawkish compared to March,” Piotr Matys of Rabobank told the news agency.
Seker Invest is now less certain a rate cut cycle will be initiated at the next MPC meeting on June 12 . Rather, it now attaches a higher likelihood of the central bank only being able to initiate a gradual rate cut cycle from
81 TURKEY Country Report May 2019 www.intellinews.com