Page 57 - TURKRptJun19

local currency was trading in the 6.07s against the USD, down 0.5% d/d, as of around 20:30 local time on May 23, while the Borsa Istanbul’s benchmark BIST-100 index finished the day 1.74% up at to 86,072. The USD- denominated BIST-100 flirted with its 2009 lows during the week but, despite tremors, the floor didn't give way.
Erdogan, Maduro and the "leftists". Back to that CDS league. Could Erdogan afford to take the number one spot from his latest bestie, Venezuelan leader Nicolas Maduro? It doesn’t seem particularly possible given that even Turkey’s “leftists” are inferring that Erdogan should head to the IMF while only pledging lachrymatory support to the “leftist” Maduro’s eyecatching fight against imperialist windmills. Where Turkey’s concerned, Maduro brings the Erdoganists and “leftists” together. However, pushing poor Venezuelans to dig in in a hollow fight against the US, the biggest buyer of Venezuelan oil, behind a leader who has dramatically polarised his nation and spent massive external borrowings on his devotees, is a different case entirely from personally suffering the consequences of Turkey’s fight against the biggest international financers of your country’s debt-fuelled (and “debt-fooled”) consumption boom under Erdogan's Maduro-esque leadership. Oh, the dilemmas of the Third World eggheads who don’t want to live under an Islamist dictator but deem living under a “leftist” autocrat as proper for Venezuelans are rather specious! For they are not interested in cutting their enslaving consumption and overcoming the synthetic polarisation in favour of coming together under a logical plan. Turkey’s booming CDS level suggested that risk perception towards TRY-based assets has significantly increased, the Istanbul-based brokerage also noted, adding: “In this regard, any reactionary buying at the BIST might well be utilized for profit taking.” With the heavy bombardment on the economy, in the form of discussions over a possible Turkish default ahead, intensifying, IMF spokesman Gerry Rice came up with some reiterations on May 23 when he was asked about the impacts of the likely upcoming ‘S-400’ sanctions from the US on the Turkish economy during his regular press briefing: “You know, what I'd say on Turkey is that we continue to monitor the economic situation there very closely, and as we've said before—not a new statement, but to reiterate—we recommend a comprehensive, clearly communicated policy package to secure macroeconomic and financial stability. “Let me add, and again, this is not new; I'm emphasising, reiterating. We've received no indication from the Turkish authorities that they are contemplating a request for financial assistance from the IMF, so the recommendations that I just talked about, they don’t come in that context; just to be very clear about that. On the sanctions and so on, I wouldn’t want to speculate prematurely on the possible impact.”
'5.50 Robin' throws his hands up. Meanwhile, Robin Brooks of the Institute of International Finance (IIF), who’s known as ‘5.50 Robin’ among Turkish Twitter users in reference to his Teflon fair value for the USD/TRY rate, threw his hands up on May 23. “After 2 days of meetings with investors, with much of the focus on Turkey, there's a deep erosion of foreign investor confidence, with real money outflows now bigger than in the 2018 EM sell-off. Turkey urgently needs an interest rate defense of the Lira, not more credit growth,” Brooks said in a tweet. “Foreign investors are so bearish on Turkey because they have learned that elections are preceded by credit booms, which destabilize the BoP and weaken the Lira. They are expecting the same now ahead of the June 23 election. An interest rate defense would dispel that perception,” he added in another tweet. “So far this year, Turkish Lira is down 15% vs the Dollar, almost the same drop as in 2018 at this point. It is very unusual for EM currencies to see back-to-back weakening and should give policy makers in EM pause. Market sentiment on EM is very negative,” Brooks also said, underlining how idiosyncratic policy errors could break down all clichés. “One investor this week explained her bearishness on Turkey to me like this: ‘I don't think the government is willing to accept the kind of GDP drop needed to stabilize the Lira. Therefore, there will be more short-term focus on credit-led growth, which is bad for the currency’,” Brooks concluded, forgetting to add that women are smarter. Take heed.
57 TURKEY Country Report June 2019 www.intellinews.com