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.)

Turkish Daily Report

MACRO

·         DRAGHI SPEAKS; EYE ON POLICY > Risk sentiment remains weak with concerns re global growth outlook, as seen from declining energy & commodity prices. Today, ECB account of Dec MPC meeting will be published and Draghi will speak. Slowdown in global growth fuelling expectations of further ECB stimulus after measures announced in Dec disappointed mkts.

·         CBRT SURVEY > CBRT will announced monthly survey of expectations today, where inflation forecasts are likely to move higher with currency weakness & higher-than-expected Dec inflation.