Page 4 - TURKRptJun20
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1.0 Executive summary
“Emerging-Market Watchers Say Another Sell-Off Is Approaching.” On May 8, IMF chief economist Gita Gopinath said that “the world can expect more waves of financial market turbulence”.
Turkish QE continues.
USD/TRY saw a fresh record high of 7.27 on May 7. Erdogan stepped up import compression and capital control efforts. Some critics see lira trading by now as a closed, controlled market, given the innumerable regulatory changes and other moves made by the Erdogan administration.
In a May 20 report, Bloomberg quoted unnamed officials “with direct knowledge of the matter” as saying that Turkish policymakers were concerned lower lira deposit rates might result in a rush for more USD and thus create another source of imbalance. Some private lenders have aggressively cut their lira deposit rate offers. They have made that move, rather than boosting their loans, in order to comply with the regulator’s recently-imposed asset ratio.
Turks “are taking out loans from banks to buy gold and hard currency.”
The average rate lenders offer for lira account deposits dropped to 8.4%. That’s the lowest level seen since November 2013.
Sara Grut, Goldman Sachs, on April 30: “One country we remain bearish on is Turkey. They have a pretty large funding gap. A lot of that is corporate debt and the risk is that this spills over to the sovereign, which has very limited reserves.”
As ranks of “employed unemployed” thicken, Turkey risks “social collapse” (See Section 4.5.1).
80% of Turkish CFOs are now worried about financing problems, significantly up from the global average of 67%, according to PwC's COVID-19 CFO Pulse.
External debt rollovers continue undeterred without defaults. Spring season for Turkish lenders’ syndicated loan rollovers has ended with about 80-90% rollovers thanks to the support from the EBRD and the IFC (See Section 5.4).
Fitch Ratings revised the outlooks from Stable to Negative on state-owned lenders Ziraat Bank and Vakifbank and private bank Garanti BBVA, citing Ankara’s weaker foreign currency reserves. It also downgraded Halkbank to 'B' from 'B+', and kept the rating on rating watch negative (RWN). The ratings of three other banks Akbank, Isbank and Yapi Kredi have been affirmed.
Q1 financials season at Borsa Istanbul continues (See Section 4.3.2). Lazard's stake in Turkey’s Tupras fell to 4.91% (See Section 9.2.1).
Auto output plunged more than 90% y/y in April. Turkey’s auto industry is not expected to return to normal operations until September. Total revenue loss of the automaking and auto parts supply industries “would be around $5bn in 2020”. Ford Otosan (FROTO) resumed production on April 27 and Tofas (TOASO) on May 11.
Turkey’s steel exports plunged by 35% y/y between April 1 and April 20 and the decline is expected to continue into May. Turkey imposed tit-for-tat duties on EU steel products.
4 TURKEY Country Report June 2020 www.intellinews.com
