18 Ocak 2016 Pazartesi

EM EMEA is being sold 13.4% in 2016 with MSCI Russia and South Africa down 14.9% and 16.5 respectively.


EM EMEA is being sold 13.4% in 2016 with MSCI Russia and South Africa down 14.9% and 16.5 respectively.

MSCI Turkey is down only 4.6% YTD.
·         Last week, MSCI Turkey (-0.3%) outperformed EM EMEA by 6.4%, Russia by 10.9% and South Africa by 6.6%;
·         Turkey is outperforming EM by 6.3% in the first 10 days of trading for 2016;
·         Turkey is outperforming India by 3.2% YTD and is the second best-performing major EM this year after Indonesia (-2.5%)

Along with energy commodities’ collapse, we attribute Turkey’s relative EM and EM EMEA outperformance in 2016 to expectations of macro-prudential easing by the BRSA. (36.9% weight of BIST30 is Banks.)

For BIST100, main USD support ($23.2k) is being defended : Friday afternoon, $23.2k major support was tested for the 6th time in the last 2 months and again, the index found a buyer. (Close = $23.4k)

This morning, Asian EM is selling off with Philippines (-2.0%) and Indonesia (-1.0%) taking the lead on the downside. USDTRY (3.04) and TRY basket (3.18) are flat from Friday night close. We expect a slightly negative opening for BIST equities based on EM dynamics.   

This week’s main macro event for TRY-denominated assets is the MPC meeting scheduled for tomorrow : no economist expects a move in the ‘’policy rate’’ nor the rate corridor with the upmoves in VIX and MOVE volatility indices heading higher since the CBRT changed language in December.


•             MPC meeting tmrw> In Dec’15 CBRT remained on hold stating, “monetary policy simplification steps will begin with the next meeting, should the decline in volatility prove persistent”. We think this expectation of lower volatility implies expectations of +VE risk environment & underlines CBRT’s willingness to cut upper bound of corridor => risk environment has not proved +VE, increasing likelihood that CBRT will again remain on hold tmrw. Since last meeting on 22 Dec =>basket TRY +3.5% but 18% decline in oil prices more than compensated for inflationary impact of weaker ccy. However, inflation exp deteriorated significantly with higher than exp’d Dec infl, pro-growth gov policies & 1pp upw revision to gov’s infl forecast to 7.5% in Medium Term Programme.

•             TRY weakens in line with peers> TRY remains in line with peer EMs lately => ongoing sell-off in equities & EMs led basket TRY to elevate above 3.18, highest since beg-Oct. MPC meeting tmrw => IF no chg in corridor setup & further delay in simplification of monetary policy => will likely be market neutral. We think any sign of willingness to cut the upper bound of interest rate corridor, let alone a cut, would lead TRY basket to test Sep highs @ 3.25, assuming that global risk sentiment does’t take an abrupt turn to +VE. We think most hawkish move by CBRT would be hiking 1-wk repo rate & keeping upper bound intact, as well as incr’sing avg repo funding cost slightly => probability low & +VE impact on ccy would be lmtd, bearing in mind that Governor Basci’s term ends in Apr.   

•             Bonds on sidelines>  Exp for further easing from global central banks on d/s risk on global activity outlook seem to have capped ups on EM bond yields => avg G3 10y bond -14bp to 0.91% since beg of the yr, avg EM 10y yield -3bp to 6.75%, acc to our calculation. TK BONDS> pro-growth policies of gov undermining infl outlook & dovish central bank stance led 10y yield +39bp to 11.13%, as of Fri. If CBRT keeps its current policy stance @ MPC meeting tmrw => neutral for yields & curve shape. Any dovish tilt (unlikely due to deteriorating global risk sentiment) => would lead to bear steepening @ curve => long-end yields will more likely to breach above 11.5% => highest lvl attained during sell-off periods in 2014 & 2015.


·         SAHOL (BUY, TP: TRY10.70) > Sabanci Holding ann’d Exsa bought an add 3.49m shrs on Jan 15 @ btw TRY7.93 and TRY8.00/share => Exsa's shareholding in Sabanci Holding has increased 0.17ppt to 0.78% (15.9m shares) with this purchase. Sl. +VE for SAHOL. This was the tenth purchase since the holding announced a 40m share-purchase program on Dec 29 to last until the next shareholders meeting which is usually held in late March.

·         PGSUS (HOLD, TP: TRY21.00) > has resumed its flights to Russia from Turkey starting Jan 15 after obtaining Russia visas for its flight personnel according to the airline. Recall that the airline had suspended its flights to Russia from Turkey due to the visa problem on January 5. We est. flights to Russia from Turkey account for 1% to 2% of Pegasus’s revenues. SL +VE.

·         TUPRS (BUY, TP:TRY83.00); THYAO (BUY; TP: TRY 11.20); PGSUS (HOLD, TP: TRY21.00); GUBRF( HOLD; TP:TRY6.80) > The nuclear-related int’l sanctions against Iran including those by the US was removed over the w/e after int!l nuclear watchdog, IAEA, said Iran had complied with its agreement with P5 + 1 countries. The removal of sanctions allow Iran & most countries to normalise their mutual int’l trade activities to a large extent including allowing to import as much oil as they like from Iran. Comment: The removal of sanctions, in general, is +VE for refiners & airlines globally in 2016 & possibly 2017 as they would keep oil prices low. RE TUPRS> The removal will allow TUPRS to purchase more crude oil from Iran (20- 25% of its purchases in recent yrs after sanctions, was as high as 45% at its peak), however, Iranian oil may be more expensive relative to other crudes as Iran is now free to export its oil many other countries. RE GUBRF> Removal of santions will help Iran to attract more investments into its natural gas industry, which has remained underinvested => revamp its domestic natural gas grid. Higher natural gas procurement will help GUBRF incr ammonia production => over nx 2 yrs, the company could incr its ammonia production by 20% to 1m tonnes. In our view, even with higher production volumes, rising local gas prices, rising labour expenses on high local inflation, & stronger Iranian rial (IRR) will eat away at profitability. Hence, in the absence of any hike in ammonia prices on a potential incr in grain prices, profit mrgns will trace a downward trend. However, in the s/t due to incr’d interest in Iranian assets, GUBRF could may o/p despite our fundamental worries. GUBRF REPORT: 

·         ARCLK (HOLD, TP:TRY15.9) > Arcelik’s 96.7% owned subsidiary operating in Romania, Arctic SA, will convene its General Assembly on February 15, 2016 to approve an investment project to cost EUR105m to build a new factory to produce washing machine (1.1m capacity) and dishwashers (500k capacity). Romanian government will provide EUR37.5m cash incentive is the investment is approved. Note that Arctic has a cooler plant in Romania.  We deem the news +VE for Arcelik as increasing its production capacity in Europe with substantial incentive from the government will enable the company to support its sales in the region. 

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