Market Watch - Monday, July 17, 2023
Outlook:
The BIST100 Index started Friday on a positive trend, closing the day at 6,437.74, up 1.09%. Stocks such as THYAO, SISE and SAHOL made the strongest contribution to the Index on a points basis, while the Industrial Index rose by 0.89%. The Banking Index diverged negatively, down 0.95%. On a weekly basis, the BIST100 rose by 4.05%. The Industrial Index rose by 2.49% and the Banking Index rose by 11.86%. We think that the negative real interest rate policy, which will continue for a while during the gradual normalization period, will continue to be supportive of BIST in the short term. While the strong foreign inflow to the BIST continues for the fifth week in a row, it remains the key driving force by supporting the rise in the Index. The recently developed positive relations with the USA and the EU also support the general positive pricing in BIST and TRY-based assets. We think that it is normal to experience profit realizations from time to time at the BIST, which has achieved a rapid rise in a short time. In the medium term, we think that the direction of the markets will become clear after the steps to be taken and the economic program to be announced are known. In major global stock markets the strong course in risk appetite continues. After the inflation data from the USA printed below expectations, anticipation that the Fed would end interest rate hikes after a 25 bps interest rate hike have strengthened, while indices completed last week with strong increases ranging from 2-4%. Although there are profit sales in the short term, we expect the uptrend in major stock markets and risky assets to continue, as long as there is no macro data that points to a recession, with declines presenting a buying opportunity. This morning, Chinese growth data fell short of expectations, suppressing risk appetite, while the U.S. futures, German DAX futures and Asian Stock Markets generally followed a limited-selling course. The VIX hovers near 13, indicating low volatility and selling pressure in the U.S. Stock Markets. The VIOP-30 Index ended Friday up 0.54%. Locally, we expect the Benchmark Index to start the week with a positive trend, and although the uptrend continues, it will lose strength and follow a fluctuating course amid profit sales. SUPPORT: 6,386 - 6,340 RESISTANCE: 6,488 - 6,560.
Money Market:
The Lira was negative on Friday, weakening 0.25% compared to the USD to close to 26.1656. In addition, the currency depreciated by 0.49% against the basket composed of $0.50 and €0.50. Meanwhile, the local fixed income markets were relatively flat. The ten-year benchmark bond ending at 17.02%, unchanged from its previous closing.
Headlines:
Central Government Budget Statistics for June will be published on the macroeconomic data agenda today. We expect the trend in the budget deficit, which has risen sharply due to the general elections, natural disasters and postponed collections, to continue at a decreasing rate. Our detailed analysis after the data emerges will be published within the day.
For HalkBank Halk (HALKB.TI; MP) our 2Q23 net income estimate is TRY733mn (-83% QoQ, -72% YoY) with a rather weak quarterly ROAE of 2.5%. Tumbling NII (-66% QoQ) due to higher funding costs was the main negative of the quarter. Contrary to the trend seen in other banks, we are modeling a trading loss of TRY1.3bn due to swap funding costs vs TRY315mn trading loss of in 1Q23.
Solid 20% QoQ increase in TRY loans supported by SMEs, slight contraction in FC loans, slowdown in TRY deposits growth, strong rebound in fee and commission income (+30% QoQ) and normalized OPEX are the other highlights of the quarter.
The CPI linker contribution should decline by 14% QoQ as the bank is set to use 50% in valuing its CPI linker portfolio, vs. 58% in 1Q23. Swap funding costs should ease 30% QoQ amid lower cost. NIM (adjusted) to weaken by as much as 300bps QoQ to 1%.
On the asset quality front, CoR (total, net) should reach to -30bps due to lack of front-loaded provisions. Finally, we expect an effective tax rate of 70% due to deferred tax provisions (Negative).
Company News:
Turkish Airlines (THYAO.TI; OP) is to initiate necessary works to establish an electronic money and payment services corporation and conduct relevant regulatory licensing processes.
Turkish Airlines (THYAO.TI; OP) has announced that the Company is to establish "AJet Hava Taşımacılığı Anonim Şirketi", a wholly-owned subsidiary of Turkish Airlines to continue the operations of the AnadoluJet brand as a low-cost carrier at global standards, and to strengthen its competitive positioning in the market.
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