Page 90 - TURKRptMay19

8.3.2 ECM news
‘Erdogan attack on short sellers’ ignited big sale of Turkish stocks and bonds among foreign investors. Foreign investors sold $601.5mn worth of Turkish stocks and $735.8mn of government bonds in the week to March 29 which saw the Erdogan administration purportedly attempt to shut down Turkish lira liquidity on the London swap market in an attempt at defending the currency against a severe devaluation ahead of the March 31 local elections. The lira liquidity squeeze forced traders to quit Turkish assets to get their hands on Turkey’s currency in order to close short positions. There were reports of Turkish banks saying they had been ordered by officials to not sell even a single lira on the offshore market. The Turkish lira overnight swap rate soared to as high as 1,200% as the currency became unobtainable.
8.4 International ratings
8.4.1 International ratings - specific details of rating actions corp/regional etc
TURKEY - Rating agency
Jun-18
Jul-18
Aug-18
May-19
Bond rating: Moody’s
Ba2 (UR)
Ba2 (UR)
Ba3 (N)
Ba3 (N)
Bond rating: Fitch
BBB- (S)
BB (N)
BB (N)
BB (N)
Bond rating: S&P
BB- (S)
BB- (S)
B+ (S)
B+ (S)
Turkey credit rating not at risk but further lira fall would be “very, very bad news”: S&P Global. Turkey’s credit rating is not presently at risk of a downgrade though a further fall in the Turkish lira (TRY) would be “very, very bad news” for the debt-fuelled country’s corporates and banks, S&P Global said on April 4. With Turkey’s currency crisis having reared its ugly head again last week when the Erdogan administration attempted to squeeze short sellers of the lira ahead of local elections day, Gill observed that more lira woes would eventually lead to more companies having difficulties paying back loans. S&P Global says Turkey’s official estimates of bad loans do not count all the problem loans in the system.
“Despite the turnaround in the current account, balance-of-payments risks persist due to the sizable stock of external debt with a front-loaded maturity schedule, ” S&P Global Ratings said in February when it affirmed its unsolicited long-term foreign currency sovereign credit rating on Turkey at 'B+' with a stable outlook.
On April 12, Moody’s Rating Services agreed in a research note that Albayrak’s economic reform program was light on content and details, and that Turkey’s economy remains beset by structural problems . Moody’s expects Turkey’s budget deficit to come in at 3.3% of GDP in 2019 versus the government forecast of 2%. In his presentation, Albayrak kept to the government’s GDP growth and inflation forecasts of 2.3% and 15.9% for 2019, respectively, but Moody’s expects a 2% contraction in growth and headline inflation of 17%. A lack of transparency around the Turkish banking industry’s NPL ratio remained a concern and the risk in Turkish banking assets continued to worsen, the rating agency also said.
External vulnerability. Moody’s Investors Service lately upgraded Turkey’s external vulnerability risk to High+ from High due to its high external financing requirements. The rating agency announced the change on March 19 in a non-rating credit opinion report. Moody’s said it expected Turkey’s current account deficit to contract because of declining consumption and investments, but that the external financing requirement would remain high because of the
90 TURKEY Country Report May 2019 www.intellinews.com