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20 I Companies & Markets bne April 2019
has fallen back, financial conditions have continued to ease and the government has provided some fiscal stimulus ahead of March’s local elections. Industrial production figures for January due on [March 14] will provide a clearer steer on how the economy has shaped up,” Tuvey added.
$500mn eurobond
Meanwhile, on the debt markets, Turkish glassmaker Sisecam sold $500mn worth of 7-year USD-denominated eurobonds at a 6.95% coupon rate, the company said on March 8 in
a bourse filing. The yield to the investor stood at 7.25%, Reuters reported.
Private lender Yapi Kredi Bank has issued $500mn worth of 5.5-year USD-denominated eurobonds at a yield and coupon
“The rebound in Turkey's TRY- denominated lending is striking, especially its composition”
rate of 8.25%, the lender said on March 8 in a bourse filing. “It’s interesting to see the market so busy,” an emerging markets syndicate banker told Global Capital on March 7, adding: “Turkey does still look like good value.”
The Capital Markets Board (SPK) has approved the Turkish Development Bank’s (TKB’s) second wealth management fund’s application to sell TRY1bn worth of asset-backed paper based on mortgage-backed securities to be issued
by Isbank, Akbank and Yapi Kredi Bank, according to the SPK’s latest weekly bulletin published on March 8.
The bulletin also showed that Turkcell received the green light to sell $750mn worth of eurobonds.
Yapi Kredi Bank has received approval from the SPK to issue TRY400mn worth of 5-year mortgage-covered bonds abroad, the lender said on March 11 in a bourse filing.
“Rebound in TRY lending striking”
“D. Private domestic & foreign banks are consolidating still, so – unlike any previous period – the lending rebound
[in Q1] is almost entirely due to public banks,” Robin Brooks of the Institute of International Finance (IIF) said on March 10 in a tweet.
Real banking credit in Turkey shrank by 7.2% on a quarterly basis in the last three months of 2018. Government officials have been busy ‘persuading’ banks to issue more and cheaper loans. How the public lenders are financing their lending growth has become a worrying question for analysts, but annualised credit growth turn positive in February for the first time since August.
“Our model continues to signal fair value for $/TRY [Turkish
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lira] around 5.50, largely because the current account adjust- ment at this stage is mostly cyclical,” Brooks wrote on March 8.
“Growth wasn’t balanced”
“Turkey was one of the fastest-growing emerging economies in 2017, but its growth wasn’t balanced. Excess government spending and rapid credit growth caused imports to surge and the current account deficit to widen. Unsurprisingly, the economy is paying the price for past excesses,” Ziad Daoud of Bloomberg Economics said in comments on
the Q4 GDP data.
Although not reaching 2017 levels, Turkey’s damaged economy has experienced current account deficits – albeit at relatively limited levels – since December while government spending and the public lenders’ loan provision is booming in the build-up to the local polls.
Turkey posted a relatively limited current account deficit of $813mn in January versus a $7bn deficit in January 2018, the central bank said also on March 11. The 12-month cumulative deficit declined further to $21.6bn in the month from $27.8bn in December.
A Bloomberg survey had predicted a deficit of $650mn for January.
Standard & Poor’s forecasts Turkey’s GDP will contract by 0.5% y/y in 2019 amid tight financing conditions and elevated inflation.
On the capital flows front, Liam Carson said on March 8 in Capital Economics’ Emerging Markets Capital Flows Monitor for February: “The improvement in capital flows in the first two months of 2019 mirrored the good start to the year for EM financial markets. Global investor appetite for riskier assets was supported by a dovish shift by the Fed and easing trade tensions between the US and China.”
“Inflows have started to dry up”
He added: “However, more timely data suggest that inflows have since started to dry up. Daily figures on purchases of stocks and bonds provided by a handful of EMs point to a fall in inflows in early-March. Admittedly, these figures don’t match the official balance of payments figures with a high degree of accuracy – the daily data cover fewer countries and a more limited range of assets. They do, though, offer a sign that the deterioration in risk appetite has led to a pullback from EM bonds and equities.”
Capital Economics sees investor sentiment as likely to deteriorate further this year. It expects that concerns about slower global GDP growth will intensify over the coming quarters, resulting in a further rise in risk aversion and reducing demand for EM assets.
“The Turkish lira was one of the worst performing EM currencies [last] week which, in part at least, seems to reflect investors no longer buying the central bank’s hawkish