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The government’s deficit target in 2020 is equivalent to 1.2% of gross domestic product, but Kara said it could reach around 4% by the end of this year. A recovery in tourism revenue may help stabilise the current account, but a persistent shortfall makes a drop in gross and net reserves “inevitable,” he said.
“That means, given the low level of international reserves, the current-account deficit should not—and cannot—exceed a certain threshold in the short term,” Kara concluded.
8.3 ​Stock market
US-based BlackRock—the world’s biggest money manager with around $7.3 trillion in assets under management as of end-June—has trimmed some exposure to Turkey​ because of the economic trajectory expected there in the next few months, Gordon Fraser, co-head of global emerging markets equities at the investment management corporation, ​told​ Bloomberg on July 19.
Fraser has also taken profits in Chinese stocks following their recent historic rally while he is now betting on stocks in Indonesia, India, Russia and Mexico. He sees these four countries—among the worst hit by the coronavirus (COVID-19) crisis—as having sustainable levels of debt and notes their floating exchange rates.
Fraser also said he remained cautious on Brazil due to its fiscal position while he was underweight in Taiwan and South Korea since they have already outperformed.
The foreign-held share of equities listed on the Borsa Istanbul fell to 49.18% as of July 20 at market close, Is Invest’s daily shares bulletin showed on July 21.
As of July 17, Deutsche Bank’s local brokerage unit Deutsche Securities Menkul Degerler ceased its operations in Turkey.
Meanwhile, the Turkish government’s domestic bonds became Euroclearable as of July 20.
As of July 10, the foreign-held share in Turkish domestic government bonds stood at around 4%. There have been some claims from the government and pro-Erdogan administration sources that huge funds will flow into domestic government bonds after the possibility of holding the papers in question via Brussels-based Euroclear Bank is introduced.
Turkey’s central bank generally releases weekly portfolio flows data on Thursdays at 14:30 local time.
However, it has not scheduled weekly securities statistics releases for July 30 or August 6. On August 7, it is scheduled to release at 14:30 local time data for both the week ending July 24 and the week ending July 31.
One option is for local lenders to transfer their government papers to Euroclear’s omnibus account opened at Turkish clearing and settlement bank Takasbank. That would help to disguise the awful reality of the domestic government bonds market, with the foreign-held share of the bonds headed for zero.
“One consequence of very depressed activity in EMs is that current account deficits are likely to have narrowed in many countries, reducing reliance on capital inflows to finance domestic spending. So while portfolio flows are likely to swing with the vagaries of risk appetite, few major EMs look vulnerable to a
55​ TURKEY Country Report​ August 2020 ​ ​www.intellinews.com