By David O’Byrne of bne in Istanbul
Turkish football is no stranger to empty stadia, with the football authorities regularly ordering matches to be played behind closed doors as punishment for the misbehaviour of fans and players alike. But the April 20 derby match between fierce Istanbul rivals Fenerbahce and Besiktas was different. Continue reading »
The “fragile five” – Brazil, India, Indonesia, Turkey and South Africa – have had a torrid time since Morgan Stanley identified them last year as countries particularly vulnerable to the “tapering” of US monetary stimulus because of their large and rising current account deficits.
But, over the last two months, the investor storm that drove currencies, bond prices and equities lower in these five countries has abated. The pariahs of only several weeks ago have become investor darlings.
The questions now are: how sustainable is this rally and to what extent does this investor rehabilitation result from the five countries’ hard work to repair economic frailties? As a guide, we present our own ranking – the beyondbrics “fragile five work/reward quotient” (see below). Continue reading »
Food and beverage vendors and technology firms are most vulnerable among those Turkish companies with hard currency debts to the lira’s sharp depreciation, according to a survey of 10 corporations by Fitch, the credit rating agency.
Assuming a 30 per cent depreciation in the lira against a basket of currencies since the end of 2012, Fitch examines which companies have the highest proportion of their earnings in lira versus debts in hard currency – a transgression known as “original sin”.
Continue reading »
Turkey’s banks are having a bad time. The sector’s 16-bank MSCI index fell by as much as 15 per cent during the past month, hitting a price-to-book ratio of less than 1 for the first time in five years.
Perhaps that isn’t surprising given that higher interest rates, slower growth and a cheaper lira are likely to persist, while credit expansion won’t sustain its rapid pace of the past decade. In 2013 alone the volume of loans rose by just shy of 30 per cent and the ratio of banks’ loans to deposits currently stands at 107.7 per cent, after breaching the 100 per cent level in 2013 for the first time in at least a decade.
So, how well prepared is the financial system for the end of a world of easy money and abundant capital inflows?
Continue reading »
If market consensus is correct, Turkey’s central bank will raise interest rates on Tuesday evening. It’s an issue that has gripped investors, partly because of the opacity of Turkish monetary policy over the past central years. But putting the mechanics to one side, what would be the impact of tighter monetary conditions on Turkey’s economy?
Beyondbrics has taken a look. Continue reading »
The FT today publishes a special report, Investing in Turkey, on the challenges facing the country’s government and private sector as it struggles to gain competitiveness and deal with one of the most daunting current account deficits in the developing world. At 13.00 GMT, Daniel Dombey, Turkey correspondent, and freelance writer Andrew Finkel will host a live discussion on Twitter on the country’s economic and political future. Here, Dombey outlines the difficulties Turkey faces in delivering the investment needed for growth. Continue reading »
Credit card debt is the latest frontline in Turkey’s bid to make its economy less vulnerable. For several years, the country’s technocrats have fretted about rates of loan growth running at an average of about 30 per cent a year.
So the country’s banking watchdog took a dramatic step last week to get the phenomenon under control, with new rules limiting credit card borrowing limits. Continue reading »
This week, Turkey reported better than expected growth figures. But Thursday, it came out with worse than expected current account figures – a $5.8bn deficit for July, compared with an expected $5.5bn or so.
So the phenomenon widely seen as the Turkish economy’s biggest Achilles heel – the deficit that makes the country deeply reliant on foreign funds – is still stubbornly large. This at a time when foreign resources are expected to be in much less bountiful supply, due, among other factors, to the prospect of US Federal Reserve tapering its monthly bond buying programme. Continue reading »
In these days of increased scrutiny of emerging markets, it is always important to keep a close eye on the most telling numbers about an individual economy.
One such figure came this week, when Turkey reported a higher than expected rate of growth for the second quarter – 4.4 per cent, compared with expectations of 3.5 per cent or so. There were other stories tucked away in the data – notably the importance of household consumption, state spending and inventory building in boosting demand, even as private sector investment declined. But overall the news was certainly a fillip to the government in a difficult economic environment. Continue reading »
By Anthony Skinner of Maplecroft
Previously respected for his political vision and acute instincts, Turkish Prime Minister Recep Tayyip Erdogan may increasingly become a liability for his ruling Islamist Justice and Development Party (AKP). The premier’s campaign to quash dissent in civil society and the business community, his righteous criticism of EU and fellow NATO allies, and impressive array of conspiracy theories are a big concern. Continue reading »
Turkish house prices are on a seemingly endless rise. The latest figure, for May 2013, shows an increase of 12.2 per cent annually.
Turkey is used to double digit house price growth rates. Since the Central Bank of Turkey started producing its house price index in 2010, growth rates have almost always been in double digits, and rising. But economic growth has slowed from 8 per cent plus to around 2 per cent. Chart of the week takes a look at what is driving the market. Continue reading »
Some respite for the Turkish lira on Monday after a surprise statement by Erdem Basci, governor of the central bank, saying the bank would not allow global monetary and fiscal policy uncertainty to have an impact on “price stability and financial stability in Turkey”.
Has Basci joined the “interest rate lobby” so despised by prime minister Recep Tayyip Erdogan? Continue reading »
It looks like a case of whiplash Thursday for Turkey.
Ankara is looking to stave off a decline in the lira and avoid a rise in interest rates – and all that entails for growth prospects and the prime minister’s denunciations of a shadowy interest rate lobby. Developments this week have made things even harder. Continue reading »
The rally in Turkish stocks came to a halt in May. Erik Nielsen, chief economist at UniCredit, explains why to Ferdinando Giugliano of the FT and looks at the dilemma Istanbul faces of controlling its current account deficit while boosting growth.
With Brazil taking over the running in emerging market protests, the television cameras have turned their focus away from Turkey. But investors have not: Istanbul remains firmly in their sights – as does the possibility of further markets carnage (whether or not the demonstrators return to the streets).
On Friday, the markets were calm as bankers weighed the impact of the central bank’s latest attempt to shore up the lira. But nobody’s fooled – in a world of higher borrowing costs, Turkey is vulnerable. Continue reading »