Turkey Country Report Apr21 - April, 2021

April 1, 2021

Summary:

Has Erdogan totally lost sight of reality? On March 19, he fired the third central bank chief in less than two years. Balance of payments crisis and authoritarian crackdown seem ahead.

Turkish lira has been defended so far while all Turkish assets were heavily sold and foreigners fled away. The lira finished the first turbulent week at more than 8.10 to the dollar.

How short can Turkey go to defend its currency? When will the lira dam break?

Another inflation tsunami is on the way.

So far, no additional capital controls have been announced. Putting a brake on the lira may require hardcore capital controls.

When will the policy rate be cut?

Joe Biden hit Russia’s ruble (RUB) with calling Vladimir Putin “a killer” during an unscripted live interview on television. No tangible move or signal against Erdogan yet. But, may the lira fall victim to a stray bullet from a public relations gunfire?

On the planet Earth, the tensions seen between the Fed and the markets remain unsettled. The Fed and its Treasury branch, namely former Fed chair and current US Secretary of Treasury Janet Yellen, parrot the line that the money printing will continue in the foreseeable future, whatever the inflation rate turns out to be.

However, it seems that it is more profitable at the moment to not believe in the Fed.

US President Joe Biden’s $1.9 trillion stimulus package is now a past event that was already priced and negatively affected the US Treasury yields, while the chatter about upcoming tax hikes is not helpful in terms of relaxing the market. Let’s watch for when the tensions between the policymakers and the markets settle down ahead of a positive mode taking over.

The market is currently pumping commodity prices while asking for higher official inflation rates and higher interest rates across the globe.

Turkey’s official daily count of new coronavirus (COVID-19) infections hit 26,182 on March 23, the highest figure seen since mid-December.

Twitter has decided to establish a legal entity in Turkey to comply with the country's new stringent social media law.

Stress in mega projects continue.

Turkey’s problem loans ratio appeared to reach 15.2% at end-January. Isbank sold NPL portfolio prior to central bank governor turmoil.

Turkey Wealth Fund renewed syndicated loan at 125% rollover rate and 25bp lower cost. Akbank is awaited to launch the spring syndicated loan renewals season for Turkish banks.

Oyak Renault and Tofas halted production as the global chip crisis reached Turkey.

Turkey’s 1GW solar tender attracted bids of 9GW.

Turkey’s crude oil imports declined 5% y/y in 2020 while natural gas imports were up 6% y/y.

Brent oil price in Turkish lira set a new record.

All commodity prices including oil have been rising on supply shortages and financial speculation. One positive side for Turkey is that the booming prices appear to have no impact in the country's official inflation figures. When it comes to the trade balance, the deterioration brought about by the rising oil prices is not open to discussion.

Turkish speculator became Azerbaijan’s top partner in Istanbul-listed Petkim.

The 2020 financials season at Borsa Istanbul ended. Dividend plans releases are progressing.

Norway’s wealth fund has cut its exposure to Turkey in 2020.

The foreign investor-held share of the market value of stocks on the Borsa Istanbul fell below the 45% level.

Five-year Turkey credit default swaps (CDS) closed the week at around 450 on March 26, up around 50% w/w from the 300s seen a week ago. Domestic government bond yields closed the week in the 18-20%s across the curve, up from the 13-15%s a week previously.

Turkey’s gaming start-ups remain a hot spot. Online groceries delivery company Getir became Turkey's second tech unicorn.

The Turkish grain board, TMO, imported 115,000 tons of feed corn. Turkey removed its sunflower oil import tax through to July.

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