Market Watch (Şeker Yatırım)

Market Watch - Friday, July 21, 2023
Outlook:
The BIST100 Index started Thursday on a positive trend with a price gap, then closing the gap amid intraday fluctuation. The Benchmark Index peaked at a record 6,700 with rising purchases, closing the day at 6,682.11, up 1.69%. The Banking Index diverged negatively, up 0.27%, while the Industrial Index rose by 1.89%. The CBRT increased the policy rate by 250 bps yesterday to 17.5%, below the market expectation of 500 bps. Strong emphasis on the fight against inflation drew attention in the decision text, and the gradual rise in interest rates was once again highlighted. Factors such as the preference for gradual normalization, continuation of the negative real interest rate policy, and foreign inflows support the BIST. Yet it is normal to experience occasional profit-taking. In the medium term, we think that the market direction will become clear once the steps to be taken and the economic program become clearer. In major global stock markets, where the appetite for risk taking is maintained, the balance sheet season is to be followed. Yesterday, European Stock Markets ended positively while the U.S. and Asian Stock Markets ended the day mixed. U.S. futures were positive, German DAX futures are down slightly and Asian Stock Markets are mixed this morning. The VIX is hovering around 13, continuing to point to low volatility and selling pressure in the U.S. stock markets. Despite short-term profit sales in major global stock markets we expect the uptrend in risky assets to continue, with declines presenting a buying opportunity unless macro data points to a recession or weak earnings reports emerge. The VIOP-30 index closed the evening session down 0.08%. We expect the Index to start the day on a negative trend. And even if an uptrend is resumed a volatile course may be formed punctuated by profit-taking. SUPPORT: 6,571 - 6,476 RESISTANCE: 6,745 - 6,840.
Money Market:
The Lira was positive yesterday, gaining 0.30% compared to the USD to close to 26.8073. In addition, the currency appreciated by 0.57% against the basket composed of $0.50 and €0.50. Meanwhile, the local fixed income markets were negative. The ten-year benchmark bond was traded within a range of 18.47%-18.73%, ending the day at a high of 18.73%, 24 bps above its previous closing.
Headlines:
*** CBRT raises policy rate by 250 basis points to 17.5% , thus below market expectations. Tax regulations, improvement in external financing resources and quantitative tightening emphasis placed in the text of the decision: The CBRT Monetary Policy Committee (MPC) has increased the policy rate by 250 basis points to 17.5% at its meeting this month. Despite the 500 basis point interest rate increase expectation in the market, a gradual increase was ultimately preferred. In addition to the deterioration in pricing behavior, it is considered that tax regulations will have an additional negative impact on inflation. It is anticipated that the combination of the improvement in foreign direct investments and foreign financing conditions with tourism revenues in the summer months will also contribute positively to the current account balance. In addition to monetary tightening, quantitative tightening decisions will increase liquidity costs and anchor inflation expectations. The continuation of the uptrend in inflation has made monetary tightening mandatory. The fact that the inflation trend will continue to tighten until a significant improvement is seen indicates that price stability has again become the priority. The continuation of simplification steps in monetary policy will also reduce uncertainty and volatility in the market.
The details of the resolution text include the global and local outlook and the reasons for the interest rate decision. Accordingly, the Board decided to continue the monetary tightening process to achieve disinflation as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior. While global inflation is falling, it still hovers above the long-term averages and the targets of central banks. For this reason, central banks in many countries of the world continue the monetary tightening process." The inflation outlook, which was above the long-term averages due to deterioration in pricing behavior, maintains its high course. Therefore, the management of inflation expectations has become a key priority. While it will take time to convince market makers of the reduction in the long-term inflation outlook, tightening steps will gradually ensure this.
In the Board's decision, the points regarding the domestic macro outlook were evaluated as follows: "In our country, recent indicators point out that the main trend of inflation continues to rise. The strong course in domestic demand, cost-driven pressures stemming from wages and exchange rates, and the rigidity of services inflation are determinants of this development. In addition to these factors, the Committee anticipates that the deterioration in tax regulations and pricing behavior will have an additional negative impact on inflation. Foreign direct investments, significant improvement in external financing conditions, a continued increase in reserves and balancing in the current account with the support of tourism revenues will contribute strongly to price stability. The uptrend in wages and exchange rates and especially the stickiness in wages due to contracts increase the inflation pressure from the services sector. While the recent tax regulations have tightened fiscal policy, the tightening has also become compulsory. On the other hand, improvement in the current account balance led by tourism revenues and the transition to the reserve accumulation process with the improvement of financing conditions will also contribute positively to the inflation outlook.
Sector News:
*** With the Communiqué amending the Reserve Requirement ratios published in the Official Gazette, a 15% RR ratio will be applied for Currency Protected Deposits of all maturities, effective from the publication date. This move should withdraw excess liquidity and slightly raise the costs on Currency Protected Deposits.
According to the latest weekly BRSA data, Currency Protected Deposit volume has increased by TRY116bn on a weekly basis to TRY2.96 trillion. In dollar terms, the volume rose by 3.7% weekly to USD113.8bn. Currency-protected deposits represent 57.0% of FC deposits (Slightly Negative).
*** BRSA weekly: Steep USD3bn weekly rise in FC deposits (triggered by individual and commercial deposits). According to BRSA data as of July 14, 2023, FC deposits (in $ terms) rose by USD3bn WoW and 1.5% to USD199.7bn.
There was a 2.3% rise in FC deposits (in $ terms) WoW at private deposit banks. For state and foreign deposit banks FC deposits respectively rose 0.3% and 1.3% WoW. The share of FC deposits in total deposits fell by 50bps weekly to 42.7%.
Solid USD7.7bn growth in Currency-protected deposits over past two weeks. The weekly rate of growth in total TRY volume rose to 4.1% from 3.9%. The total balance rose by TRY116bn on a weekly basis to TRY2.96 trillion. In dollar terms, it rose by 3.7% weekly to USD113.8bn. The growth in dollar terms over the past two weeks is strong at USD7.7bn. Currency-protected deposits represent 57.0% of FC deposits.
Strong 5.1% growth in other institutions' FC deposits. Individual FC deposits (in $ terms) rose by USD1.3bn and 1.1% on a weekly basis to USD125.6bn. Commercial institutions' FC deposits (in $ terms) rose by USD1.5bn and 2.1%. Lastly, official and other institutions' FC deposits (in $ terms) rose by USD228mn weekly (+5.1%).
Record-high TRY270bn rise in TRY deposits. On the TRY side, sector deposits rose by a record high TRY270bn and 4.0% on a weekly basis. Individual deposits rose by TRY76bn and 2.0% while those of commercial institutions increased by TRY129bn (+6.0%). Other institutions' TRY deposits also soared TRY64bn and 9.7% WoW.
Sharp weekly easing in 3M TRY deposit rates. On the funding side, the weighted average interest rate on TRY deposits with maturities of up to 3 months eased by 284bps on a weekly basis to 34.99%. The weighted average interest rate of commercial loans (excluding overdraft and corporate credit cards) eased by 27bps to 24.96%. Thus, the spread between the 3M TRY deposits and TRY commercial loan rates eased visibly to 10 from 12.6 points.
Sharp rise in FC long position of state deposit banks. According to weekly BRSA data as of July 14, 2023, the sector's FC long position rose 3% on a weekly basis to 3,664 million dollars.
State deposit banks' long position rose sharply by 20% on a weekly basis to $1,026 million. Foreign deposit banks' long position, on the other hand, fell by 1% weekly to 1,318 million dollars. In private deposit banks, it declined by 10% to 1,061 million dollars.
The sector's FC net general position/regulatory capital ratio rose reached 4.8% from 4.7%. On a segmental basis, the ratio is 4.3% and 7.5% for state and foreign deposit banks, and 4.4% for private deposit banks.
Company News:
Akbank (AKBNK.TI; OP) has issued USD300mn in sustainable and gender-equality Subordinated (Tier-II) and Basel-III compliant debt. The maturity is 10 years with a recall option in the 5th year. As of 1Q23, the bank's capital adequacy ratio and Tier 1 ratio are 20.1% and 17.1%, respectively. The new issue is expected to improve the bank's CAR by up to 90bps (Positive).
Arcelik (ARCLK.TI; OP) is set to announce its 2Q23 financials today after the market close. We anticipate quarterly net profit of TRY 648mn (151% YoY increase), while the market average expectation is for a TRY 852mn net profit. We expect 1Q23 net sales revenues and EBITDA to reach TRY 46,842mn and TRY 4,901mn, respectively. The market's respective quarterly net sales and EBITDA average expectations are TRY 47,276mn and TRY 4,960mn.

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