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bne September 2020 Southeast Europe I 35
Turkey Joins EM's Troubled Ten
2.0Kbps 1.5
1.0
0.5
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Meanwhile, the implicit rate hikes continue. As of August 12, the central bank’s weighted average cost of funding reached 8.71% versus its policy rate
of 8.25%.
On August 13, the central bank opened a one-month repo auction and the costs were at above 10%.
Deposit and lending rates along with the government’s domestic borrowing costs are also on rise.
“The Turkish lira remains volatile while fx mkts try to work out precisely what kind of tightening of liquidity the CBT has in mind. It is not communicating
its strategy,” Julian Rimmer of Investec wrote on August 12 in a note to investors.
The central bank also opened a three- month auction to swap 20 tonnes of gold from local lenders for lira, according to Bloomberg.
The government has been tapping gold and FX from local banks as it will never need to repay.
On August 11, the government tapped an additional $3bn from local lenders in domestic bonds that pay a 1.75% semi- annual coupon.
As of August 7, the net FX deficit of Turkey’s state banks reached $12.2bn, while the central bank is still shorting dollar contracts on the Borsa Istanbul derivatives market (VIOP).
Ghana Jamaica Argentina Togo Uruguay Turkey Bahrain Ukraine Nigeria Zambia
Source: Bloomberg
The affirmation followed the withdrawal of the ratings of Bank Audi, which controls a 76% stake in Odea.
“Which countries are most exposed to
a Turkey crisis? Main channel for neg. spillovers is the financial sector. Spain (read: BBVA) is clearly #1, while France (read: BNP Paribas) is #2. This is also why the $EUR is vulnerable to a Turkey crisis (although less than in 2018),” Morten Lund of Nordea Markets wrote on August 10 in a tweet.
“Turkey PMI.... looks a “V”.... in line with our BigData (leading) but still needed to be confirmed by Hard Data (lagging). Watch out with the virus,” Alvaro Ortiz of BBVA Research tweeted on August 4.
On August 12, Turkish President Recep Tayyip Erdogan’s son-in-law and finance minister Berat Albayrak was live on TV. He talked total nonsense as always. He makes Turks fret when he talks as if he is jeering at the idea of there being a crisis when there is actually a crisis.
On August 13, father-in-law Erdogan was live on TV. The president has, as usual, his own agenda. He wants his oil and gunboat adventures in the Mediterranean and the Hagia Sophia mosque defiance to be talked about.
The so-called Fethullahist Terrorist Organization (FETO), the main opposition Republican People’s Party (CHP), some historical figures such as the late PM Adnan Menderes and the late president Turgut Ozal were present in Erdogan’s speech, which he read via a teleprompter.
He also mentioned some tunnels, “speed” trains, the targeting of Turkey with non-stop terrorist attacks, the failed coup attempt of July 15, 2016...
And he said he would talk to Angela Merkel.
As jitters over the renewed descent of the lira turning into a full-on economic crisis continued to unsettle the nation, a curious announcement arrived on August 11 from the interior ministry.
The PKK, aka the Kurdistan Workers’ Party, may exchange FX in big amounts to meet its financing needs for its winter settlement, the ministry said in a circular sent to governorships in Turkey’s Kurdish- populated southeastern provinces.
Turkey has seen countless absurdities in its four-decade long war with the separatist PKK. However, the interior ministry’s statement on the PKK’s FX exchange outlook at a time of an ailing lira was a first and it could not be ascribed any meaning.
Bancao Bilbao Vizcaya Argenta (BBVA) Spain & Garanti Turkey Equity in USD currency (@DojiGravestone).
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