Page 38 - TURKRptMar20

VTB’s analysts, meanwhile, said they saw the sovereign bond yield move from 12% to 10% as driven by state banks’ support, with little or no fundamental interest from international fixed income investors. They maintained their view that geopolitically driven sell-offs can be seen as buying opportunities.
Russian President Vladimir Putin was on February 11 set to discuss the tense situation in Syria with Turkish President Tayyip Erdogan by phone. There are mounting jitters over the stand-off in the northwestern Syrian province of Idlib between Turkish forces and Turkish-backed jihadist rebels and the Russian-backed forces of the Damascus regime.
Also on February 11, Erdogan, perhaps the only president in the world who regularly addresses his party’s caucus meeting in parliament, told his MPs that he would announce steps to be taken in Idlib on February 12.
There is a market perception, in VTB’s view, that the worsening relationship between Turkey and Russia, with the former moving more towards the West, can be seen as a positive for the Halkbank case in the US where the state lender has been indicted for evading Iran sanctions but has refused to appear in court.
VTB expected another 50bp rate cut from the central bank on February 19.
“The recent news on a preliminary investigation into banks by the Competition Board, and several fines on some banks regarding their insurance businesses, look like the early signals of regulatory pressure on the sector,” Tuzun also noted.
On February 10, the central bank imposed limits on commercial banking fees, stepping up the regulatory heat on local lenders.
Some foreign banks invested in Turkey’s banking sector are scaling down their commitments and, particularly in the case of HSBC, possibly heading for the exit. The deconsolidation of Turkish lender Yapi Kredi Bank will reduce UniCredit's exposure to Turkey's weak operating environment and will improve the Italian lender's regulatory capital by 50bp, a credit positive, Moody’s Investor Services said on February 7.
“Something weird going on in Turkey”​. “Something weird going on in Turkey—foreigners are not involved in this TRY sell off, despite the BRSA action on offshore SWAPS... Something seems to have changed... Any thoughts?” Timothy Ash of Bluebay Asset Management wrote on February 11 in an emailed note to investors.
The USD index rose 0.01% to 98.91, its highest level since early October and less than 1% away from a 2019 high of 99.67, Reuters reported on February 11.
The index has gained 1.6% in the past week as currency volatility plumbed record lows.
38​ TURKEY Country Report​ March 2020 ​ ​www.intellinews.com