Page 86 - TURKRptMay19

factored into equity prices,” he wrote. Purely from a short-term trading perspective, “one can tentatively explore a few punts starting with, as always, a bank (Garanti Bank always the best), Turkcell and maybe an airline”, he added. Turkish Airlines has fallen to lows but there are risks with the new mega airport outside Istanbul which make Rimmer stay his hand and perhaps opt for Pegasus Airlines which he said has a good model and the same kind of operational recovery profile. If one is buying for a longer timescale and is the kind of player that just buys an EM consumer stock and builds a position piecemeal over time, then retailer Migros looked very cheap to Rimmer, below 5x ev/ebitda with a mid-teens 3yr CAGR. Rimmer renounced Koza Altin on 3x ev/ebitda and a huge discount to international peers, and was not attracted by Soda Sanayi as its primary allure is now fading. He waved a fond farewell to Ulusoy Elektrik shares at TRY18.21, the outperformance of which, he said, has been startling and gratifying in equal measure. “Long-term, make no mistake, Turkey is still irredeemably doomed, heading into the future as Absurdistan, weighed down as it is by its historical baggage and the backwardness inculcated by centuries of sinister, destructive religion,” Rimmer concluded. On April 4, the European Bank for Reconstruction and Development (EBRD) pledged to help Turkey tackle its growing level of unpaid and problem loans in its banking sector and S&P Global analyst Frank Gill suggested during a webcast that Turkey’s credit rating was not presently at risk of a downgrade.
‘Feet of clay’ rally. Consequently, the Borsa Istanbul’s benchmark BIST-100 index gradually rose to 98,783 at market close on April 8 from 93,533 at market close on April 2. On April 8, the ‘feet of clay’ rally in the Borsa Istanbul ended with a 1.5% d/d decline on the BIST-100 to 97,300. On April 8, Rimmer was focused on the hazy developments in Turkish central bank’s foreign reserves. “Turkey: the ceremonial cooking of the books? All bets are off. The books are not just being cooked, they are being boiled, mashed, barbecued, sautéed and finally flambéed in a funeral pyre. It would be remiss of me (but admittedly typical) to bugger off for a week without removing the short-term trading call in Turkey (as if anyone followed it) but some terrifying rumours are circulating around fx mkts at present and risks simply do not justify the limited upside at present. “CBT reserves are presently $29bn but apparently they are including $10bn of borrowed dollars that have been borrowed for a week with $2bn coming up for refinancing daily nwith their ability to do this rendered all the more difficult by the prospect of civil unrest if AKP overturns the Istanbul vote. CBT has been recording borrowed assets as their own capital. CBT has also apparently spent $7.5bn in the last fortnight defending the lira to try and win that election. Once the mkt gets wind of the fact the CBT is basically a busted flush then TRY will plummet,” he also wrote on the day to investors. “Lira devaluation and high real rates have left Turkish assets very attractively valued, but also reflect the country’s uncertain policy path... For equities, geopolitical tensions can be another valuation driver—price/book and price/earnings ratios are low in Turkey...,” the Institute of International Finance (IIF) said on April 6 in a research note.
“EM Positioning Overhang”. In a separate research note entitled “The EM Positioning Overhang”, the IIF said on April 5: “Downside risks [for Turkish economy] remain substantial. External buffers are limited, policies need to change to deliver sustainable growth, and Turkey-US relations remain complex.” “The underlying reality is that global capital markets are more volatile and less willing to fund credit-dependent growth, which is – we believe – why [Turkey’s] recent credit expansion [prior to local polls] has again coincided with rising Lira volatility. Indeed, if we scale the quarterly flow of credit by nominal GDP, the quarter-on-quarter change in this measure – the credit impulse to GDP – is larger this year than at the peak in 2017, underscoring just how credit-dependent the growth model remains. A shift to less credit-dependent growth, including via structural reforms, is needed,” the IIF said on April 4 in a separate research note entitled “Credit-Dependent Growth in Turkey”.
86 TURKEY Country Report May 2019 www.intellinews.com