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bne April 2019 Companies & Markets I 21
rhetoric... One possible explanation for this is a rise in risk-off sentiment in recent days. Another is that investors are worried about a fresh deterioration in Turkey-US relations [with the row over Turkey’s planned purchase of Russia’s S-400 missile defence system coming to the fore],” Tuvey said on March 8 in Emerging Europe Economics weekly.
Start of easing cycle expected for June
The upshot, said Capital Economics, was that it would not read too much into the central bank’s monetary policy statements and it did not see its hawkish tone as precluding policy from being loosened. It expects an easing cycle to start in June and has pencilled in a total of 400bp of rate cuts by year-end.
“My sense is the recession will be deeper and longer than previously (thought) given the balance sheet nature of this recession. Any unorthodox response [by the government, such as] early monetary policy easing at this stage will make things much worse,” Timothy Ash of BlueBay Asset Management told Reuters on March 11.
VTB Capital has kept its Buy recommendation on Turkish automakers Tofas and Ford Otosan, and also its Hold recommendation on car retailer Dogus Otomotive and cement makers Cimsa and Akcansa, Vladimir Bespalov of Russian investment bank said on March 7 in the latest version of his CEEMEA Industrials report.
VTB Capital upgraded London-listed DP Eurasia, which operates the Domino’s Pizza brand in Turkey and Russia, to Buy from Hold, the investment bank said on March 7, adding: “Downside risks come from weaker consumption in Turkey and Russia, less openings, operational mismanagement by franchisees, and the slower ramp up of Russian restaurants to the mature profitability.”
Turkish car parts maker Ege Endustri and airport operator Tav Havalimanlari were among Finland-based Evli Emerging Frontier Fund’s Top 10 holdings as of end-February, according to the fund’s latest available investment frontier.
“February took us to Egypt, Turkey, Thailand, and Indonesia where we met with 25 companies... In Turkey, we learned more about the aviation industry as we met with an airport operator, an airline, and a baggage handler. The most timely theme was around the new airport [Istanbul’s new mega airport which officials want to eventually make the busiest in the world] which is expected to open in March, replacing the 66 year old Ataturk airport which has operated at full capacity for years. With plenty of new capacity, the baggage handler should benefit from increasing passenger traffic
in the medium term. Meanwhile the low cost carrier based in the city’s secondary airport may benefit in the short-term as the new one is home to its main competitor, is farther from the city, and still lacks a metro line. Overall, we remain cautious on Turkey and only hold fx-hedged firms,” Evli said on February 28 in its monthly review.
Trump to end Turkey’s preferential trade treatment status
bne IntelliNews
Donald Trump has hit Turkey where it hurts again, with the US set to end Turkey’s preferential trade treatment under a programme that permitted some exports to arrive on the American market duty free.
The US Trade Representative’s Office (USTR) said on March 4 that both Turkey and India will no longer be included in the Generalized System of Preferences (GSP) because they are “sufficiently economically developed” and thus ineligible.
The US imported goods worth $1.66bn in 2017 from Turkey under the GSP programme, representing 17.7% of total US imports from Turkey, according to data from USTR’s website. The leading GSP import categories were vehicles and vehicle parts, jewellery and precious metals, and stone articles.
Turkey’s automotive exports to the US will not be signifi- cantly impacted by the planned move, a Turkish auto- motive industry source told Reuters. Last year, Turkey exported $1.1bn worth of vehicles and auto parts under the GSP, the source said, adding that without the GSP treatment, these autos and parts would be subject to
a 2.5% customs tax.
Retaliatory tariffs
USTR is reviewing Turkey’s eligibility in the programme, after Ankara imposed retaliatory tariffs on US goods in response to American steel and aluminium tariffs. The tit-for-tat is part of a multi-faceted dispute between Ankara and Washington that included the detention of a US evangelical pastor, who was later released. One issue that is still plaguing relations is Turkey’s determination to buy Russia’s S-400 advanced missile defence system despite being a Nato member. The acquisition is seen
as an unfriendly move that generates security risks. But removing Turkey from the Generalized System of Prefer- ences will not be easy.
Turkish President Recep Tayyip Erdogan and Donald Trump have had a bit of a combustible relationship.
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