Turkey Country Report Nov21 - November, 2021

November 5, 2021

HARDCORE: On October 21, President Recep Tayyip Erdogan cut the policy rate by another 200bp to 16%. With this latest move, Turkey’s monetary policy dives deeper into uncharted territory. It is not possible to explain the moves made with any kind of market logic. The real sector does not seem too happy either.

Whether Erdogan is aware that conditions are not the same now as they were during his previous rate-cutting cycles is questionable. He may be blithe to the fact that this rate cutting will not bring happiness to any economic actor, ranging from the consumer to the market opportunist.

ALARM: Public banks on October 25 cut loan rates.

USD/TRY: Latest record - 9.8595 recorded on October 25. The feasible limit for the pair is currently found somewhere up in the sky but get ready for something of a U-turn somewhere along the way, likely involving the firing of the latest central bank governor.

Turkey’s 5-year credit default swaps (CDS), meanwhile, hover around the 450-level. Ten-year domestic government bond yields rose over the 20%-level (Turkey’s domestic government bond market has not been a functioning market for a long time. There are few foreigners around for a hit-and-run).

The magnitude of the currency depreciation remains the main focus in the coming period, while Turkey is entering a full-blown course of hyperinflation. Booming global inflation coupled with lira depreciation is multiplying Turkey’s real inflation, thought to already be hovering in the 40-50% range at least versus the official inflation figure in the 19%s, itself among the highest in the world.

Winter is coming: Since 2018, we have been noting that the winter falls hard on Turkey. It becomes harder as each year goes by. The suicide figures alone tell you that.

Erdogan is, meanwhile, trying to fuel the noise in foreign policy.

Political murders: From opposition parties to fugitive paramilitary gang leaders, everyone in Turkey has been awaiting political murders from the Erdogan regime as its self-dug hole is deepening and its alternatives include staying in power at any cost, fleeing abroad (where could be safe?) or enduring long sentences in jail.

Demiroren Holding’s “expanded debt restructuring talks to take in $2bn of loans.”

Eurobond sales stopped in October but there are some small-cap candidates seeking opportunities, including Turk Eximbank, Sekerbank (SKBNK), Albaraka Turk (ALBRK), Guris Holding, Calik Holding, Istanbul Municipality, Aktif Yatirim Bankasi and Nurol Holding.

Akbank (AKBNK) kicked off the autumn syndicated loan renewals season at better costs. Yapi Kredi Bank (YKBNK) and TEB followed. In the autumn season, nine Turkish banks will renew a total of around $6bn worth of syndicated loan facilities in October and November (See list below under Section 5.4).

Q3 financials season at Borsa Istanbul: Deadlines - November 1 for unconsolidated, November 9 for consolidated, November 19 for banks (See Section 4.3).

European ready-wear retailers are shifting production to Turkey from China due to booming logistics costs.

Iraqi agents “captured the Islamic State finance chief inside Turkey.”

The semiconductor chip crisis continued hitting carmakers. Oyak Renault halted production.

Commodity prices are alternately breaking records.

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