Turkish Daily Report

STRATEGY 

·        Technical outlook for BIST100 worsened yesterday:

o   BIST100 broke main USD support at $23.2k and closed at the lowest print since June 23, 2009 ($22.8k) – new USD support at $23.3k , $23.2k becomes short-term resistance;

o   BIST100, on TRY basis, broke interim support at 69.8k but closed above main support at 69.2k (low print from Dec 14)

·        Turkish equities (-6.9%) are outperforming EM and EM EMEA peers by 5.9% and 9.7% YTD on MSCI index basis.

·        As we write, Asian EM equities are printing new daily lows with all indices in negative territory (Shanghai -2.5%; Sensex -0.6%; Kospi -0.3%)  USD/EUR equal weight TRY basket is down 0.1% (3.1920 → 3.1876) from BIST close last night. We expect a slightly negative opening for BIST, especially with the recent +2% sell-off in Shanghai.

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

STRATEGY 

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.)

Daily Bulletin - Thu, Sep 3, 2015‏

Yesterday was a disappointing day for TRY investors carrying long positions. On a day, when Moody’s stated base case for Turkey is keeping investment grade rating, TRY-denominated assets could not rally.  Moody’s commentary could not even sustain a 5-minute short-covering rally in BIST. BIST closed the day flat, TRY basket and yields were higher.

 

·    Rising geopolitical risks (kidnappings in Baghdad + PKK terrorism), Koza Ipek Holding investigations and overall EM weakness may be perceived as the main reasons.

 

·    Turkey’s risk premium, 5-year CDS rose 8.1% in 2 trading days = worst performance in EM.

 

·    This morning, we expect a slightly higher opening for BIST equities just based on S&P500 close from last night. TRY basket is trading @ 5-day highs at 3.13 and traded above 3.14 yesterday despite positive Moody’s commentary.

 

·     August CPI print will be released at 8:00am London time – consensus = 0.11%. Expect tight range trading until U.S August NFP tomorrow.  

  

·     BIST100 short-term technicals:

• TRY : Support = 72.8k / 72.0k ; Resistance : 74.5k / 75.3k ; Last trade : 73.7k
• USD : Support = $24.8k / $24.5k ; Resistance : $25.2k (10-dma) / $25.9k ; Last trade : $25.0k