Page 78 - TURKRptJun19

“Turkey? Do I need to go there” “Turkey? Do I need to go there. Anticipating the election board's decision over a possible rerun of the Istanbul ballot... the lira is heading through... its journey,” Julian Rimmer of Investec said on May 2 in an emailed note to investors.
“None the wiser” “I read the communique from [Turkish central bank governor Murat] Cetinkaya [on April 30] and must confess to being none the wiser about Turkey's reserves position than I was before. I'm prepared to accept (I often use this shifty locution when faced with an unappealing prospect which I have no choice but to acknowledge) that he was correct when he discussed gross and net reserves, fx swaps, short-and long-term liabilities, commercial bank lenders and their export credits but in all honesty, it was too technical for me and I simply didn't understand... I'm also prepared to accept that everyone in the mkt understood the gobbledygook and it's just me that's stupid but I doubt retail investors fully comprehend what the CBT governor was explaining. It reminds me of Byron's line: ‘Explaining Metaphysics to the nation—I wish he would explain his explanation.’ The bottom line is that mkts were not reassured by his speech and lira sentiment remains, like the porcelain bauble..., extremely friable,” Rimmer said on May 1.
“Tragically, for Turkish corporates who must despair of ever being listed in a market which rewards bottom-up analysis, they are mostly performing very creditably. [Garanti Bank]’s 1Q was commendable and they achieve a high ROE and manage liabilities so successfully but unless the lira reverses direction it will struggle to find buyers. P/bv now 0.64x. It's clear if the mkt does turn, which stock one must immediately buy. [Arcelik] also produced a fabulous set of earnings in a duff consumer economy and raised guidance even. Mgmt here is totally on top of its game. I still don't want to buy it yet.”
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
Jun-19
Bond rating: Moody’s
Ba2 (UR)
Ba2 (UR)
Ba3 (N)
Ba3 (N)
Ba3 (N)
Bond rating: Fitch
BBB- (S)
BB (N)
BB (N)
BB (N)
BB (N)
Bond rating: S&P
BB- (S)
BB- (S)
B+ (S)
B+ (S)
B+ (S)
Fitch Ratings places Turkey at BB/Negative, two notches below investment grade, together with Guatemala and Vietnam. Moody’s Rating Services rates Turkey at Ba3/Negative, three notches below investment grade, together with Bangladesh, Bolivia and Vietnam, while Standard & Poor’s rates Turkey at B+/Stable, four notches below investment grade, together with Kenya and Greece.
Central bank regulations applied to Turkey’s forex deposits possibly negative for local banks: Moody’s. Credit rating agency Moody’s Investors Service said on May 27 that recent central bank regulations applied to forex deposits could impact Turkish banks negatively. The increased dollarisation seen in the embattled Turkish economy would, meanwhile, lower demand for the Turkish lira (TRY), it said. Forex deposits accounted for 55% of all deposits in the banking sector as of May 17, data from banking watchdog BDDK showed. “Given the increased concentration of foreign-currency deposits in banks’ funding profiles, the recent regulations are negative for Turkish banks’ credit quality because they weaken depositor confidence, specifically in relation to foreign-exchange deposits,” Moody’s said. The central bank on May 27 raised reserve requirement ratios for foreign exchange deposits at commercial banks. As it fights to save the battered TRY from further
78 TURKEY Country Report June 2019 www.intellinews.com