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sovereign downgrade.
In another press release, entitled “Turkey Downgrade Drives Corporate Actions, Highlights FX Risks”, the rating agency said on July 19 that its recent downgrade of Turkey and the lowering of the country ceiling had led to the downgrading of several Turkish corporates. “The sovereign action highlights that foreign exchange and refinancing risks remain a key threat to Turkish corporate ratings overall, given the frequent use of unhedged dollar and euro borrowing that is not matched by foreign-currency revenue,” it added. Fitch, following the shocking dismissal of the central bank governor Murat Cetinkaya last week after his apparent refusal to implement rate cuts wanted by the Erdogan administration, now forecasts a somewhat faster cut in the Turkish policy rate to 18% at end-2019 compared to a previous forecast of 20% and further currency depreciation. Consumer goods companies without significant exports could be among the most exposed as they could also face impacts from rising prices for commoditised raw materials, which are influenced by global prices even when procured domestically, according to Fitch. A government decree from last year, which is scheduled to expire in 2020, forced the conversion of existing foreign-currency leases into lira. It has provided some relief for retailers, albeit at the expense of the real estate sector, the rating agency also said, adding that the increased risk of unorthodox policy-making could affect the availability of foreign currency for non-sovereign external debtors.
On July 19, the rating agency said in a separate press release that it has downgraded the Long-Term Foreign Currency Issuer Default Ratings (LTFC IDRs) of 14 local lenders along with their subsidiaries with Negative Outlooks.
Fitch also downgraded Tupras, Turkcell and Sisecam to BB- from BB+.
8.5 Fixed income
Non-residents' holdings of equity and government domestic debt securities ($ mn)
(Market Value)
2017
2018
Jan
Feb
Mar
Apr
May
Jun
As of Jul 26
So far 2019
STOCK
Equity
51,984
29,563
35,260
34,684
29,339
27,995
29,212
28,554
31,828
31,828
GDDS
30,942
18,325
19,246
18,095
14,514
13,269
14,622
14,375
15,315
15,315
Repo
2,403
314
340
330
309
297
351
346
404
404
Private Sector
959
612
591
501
543
489
492
491
453
453
NET TRANSACTIONS (Adjusted for Foreign Exchange and Market Price Effects)
Equity
3,191
-904
1,335
59
-517
-21
-196
192
130
983
GDDS
7,278
-906
-329
-377
-868
-489
-540
131
176
-2,296
Repo
271
-1,391
15
-4
15
5
24
-8
47
94
Private Sector
42
-343
-21
-90
42
-53
-16
19
-39
-159
source: tcmb
54 TURKEY Country Report August 2019 www.intellinews.com