Market Watch (Şeker Yatırım)

Market Watch - Friday, February 24, 2023
Outlook:
The BIST100 Index started Thursday on a negative trend, fluctuated throughout the day and closed at 5,086.20, up 0.29%. Profit realization, especially in iron-steel, cement and telecom stocks, suppressed the Index. The Industrial Index diverged negatively, down 0.25%, while the Banking Index diverged somewhat positively, up 0.41%. We expect the volatile course to persist in the short term, with stock and sector-based divergences observed in the Index. And in global markets, while the U.S. and European bourses closed the day with a positive trend, Asian counterparts walked a mixed course. Core personal consumption expenditures data will be followed in the USA today. Since the data is a precursor to inflation we believe it may determine risk appetite. The U.S. futures were trading negatively this morning, while German DAX futures were bullish. Asian Stock Markets were mixed. The VIOP-30 Index closed the evening session with a slightly positive trend, up 0.12%. Locally, we expect the Benchmark Index to start Friday rather positively. Once again, any intraday pullbacks will likely prompt reactionary purchases, albeit of low momentum. SUPPORT: 5,022 - 4,950 RESISTANCE: 5,140 - 5,260.
Money Market:
The Lira was positive yesterday, gaining 0.04% compared to the USD to close to 18.8718. In addition, the currency appreciated by 0.18% against the basket composed of $0.50 and €0.50. Meanwhile, the local fixed income markets were positive. The ten-year benchmark bond was traded within a tight range of 10.49%-10.58%, ending the day at a low of 10.49%, 9 bps below its previous closing.
Headlines:
*** CBRT cuts policy rate by 50 basis points, below expectations, to 8.5%. Imbalance in supply/demand conditions created by the earthquake and support of financing conditions are the main factors behind the decision: The CBRT Monetary Policy Committee (MPC) has cut the policy rate by 50 basis points to 8.5%. The market and our expectation was that interest rates would be cut by 100 basis points. The limited reduction decision aims to support financial conditions without compromising improvement in the inflation outlook. Prominent titles in the text of the decision; possible effects of the earthquake, global recession concerns, the outlook in the current account balance and supporting financial conditions. Supporting liraization with macroprudential measures and regulations on foreign currency transactions continues to widen the gap between market rates and policy rates. The markets' pricing of the expectation that tightening steps would shortly come to an end due to concerns over a slowdown in global economic activity contributes to risk appetite and strengthens the central bank's hand in terms of additional interest rate cuts. While cheap financing conditions will keep the risks on the current account alive, regulations on gold imports will compensate for these risks to a certain extent.
The details of the resolution text include the global and local outlook and the reasons for the interest rate decision. Accordingly, "Although the recently announced data on economic activity has been more positive than expected, recession concerns persist in developed economies due to the combination of geopolitical risk and interest rate hikes. Although the negative effects of supply constraints in some sectors, especially in basic food, have been reduced thanks to the strategic solution tools developed by Turkey, producer and consumer inflation on an international scale remains high. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. Depending on the economic outlook that varies among countries, divergence between the monetary policy steps and communications of the central banks of developed countries continues. It is observed that efforts to find solutions to increasing uncertainties in financial markets with new supportive practices and tools developed by central banks continue. In addition, financial markets reflect the expectations that central banks, which raise interest rates against recession risks, will soon end their interest rate hike cycles. The fact that high global inflation increases uncertainty in the stance of the central banks keeps the risks alive. On the other hand, we should state that we find expectations that the interest rate cut cycle will end soon optimistic. While the latest US data and FED minutes point to more hawkish policies, the upper interest limit and FED interest rate map continue to be updated.
In the Board's decision, the points regarding the domestic macro outlook were evaluated as follows: "The leading indicators prior to the disaster of the century indicated that the domestic demand was more lively compared to the external demand in the first quarter of 2023 and an increase in the growth trend. The effects of the earthquake on production, consumption, employment and expectations are comprehensively evaluated. Although the earthquake is expected to affect economic activity in the near term, it is expected that it will not have a permanent effect on the performance of the Turkish economy in the medium term. While the share of sustainable components in the composition of growth is increasing, the strong contribution of tourism to the current account balance, which exceeds expectations, continues to spread to all months of the year. In addition, domestic consumption demand, high energy prices and weak economic activity in the main export markets keep the risks to the current account balance valid. It is important for price stability that the current account balance becomes permanent at sustainable levels. The growth rate of loans and the meeting of the financial resources achieved through economic activity in accordance with its purpose are closely monitored. As stated in the 2023 Monetary Policy and Liraization text, the Board will resolutely continue to use tools that will support the effectiveness of the monetary transmission mechanism and will align the entire policy toolkit, especially the funding channels, with the liraization targets. The Board will prioritize the creation of appropriate financial conditions in order to minimize the effects of the disaster and support the necessary transformation." The expectations of the earthquake disaster and the disruption of the supply-demand balance have made new measures necessary. However, despite its negative impact on the short-term production and macro outlook, the limited effect on the medium-long-term outlook is the key factor reducing risks. On the other hand, prioritizing favorable financial conditions instead of interest rate cuts will increase the effectiveness of specific measures that will contribute to the monetary policy outlook and compensate for earthquake damage. For our detailed analysis, please click the link;
Sector News:
*** The Presidential Decree on the New Housing Finance Program has been published in the Official Gazette today. The Program regulates the procedures and principles regarding housing finance to be provided by deposit and participation banks.
*** According to Bloomberg, the CBRT has imposed an aggregate TRY600mn (USD32mn) in fines on certain banks on the grounds that they did not fulfill their information obligations regarding FC transfers abroad.
Fines were TRY240mn (USD12.7mn) and TRY150mn (USD7.9mn) for Akbank (AKBNK.TI; OP) and Yapı Kredi Bank (YKBNK.TI; OP) and TRY120mn (USD6.4 mn) and TRY50mn (USD2.6 mn) for Garanti BBVA (GARAN.TI; OP) and Is Bank (ISCTR.TI; OP), respectively.
These refers to 0.4% and 0.3% of the banks' 2022 net profits for Akbank and Yapi Kredi Bank, and 0.2% and 0.1% for Garanti BBVA and Isbank, respectively.
The CBRT had brought the obligation to submit documents for FC transactions over USD50K money transfers with the instruction it sent to banks at the start of the year. It had been announced that a penalty of 5% of the transfer would charged in the absence of requisite information.
*** Sharp USD8.1bn decline in FC deposits (in $ terms) over the past 5 weeks. According to BRSA data as of February 17, 2023, FC deposits (in $ terms) fell by USD3.2bn WoW (-1.5%) to USD217.3bn. This brings the cumulative decline to USD8.1bn (-3.6%) over the past 5 weeks.
There was a visible 1.6% decline in FC deposits (in $ terms) WoW at private deposit banks. For state and foreign deposit banks FC deposits respectively fell by 1.4% and 1.3% weekly. The share of FC deposits in total deposits fell by 90bps weekly to 43.6%.
Currency-protected TRY deposit growth decelerated. Weekly growth eased to 1.1% from 1.9% in the prior week. Total volume reached TRY1.5bn (USD79.7bn), corresponding to 36.7% of the total FC deposit base.
Steep rise in commercial institutions' FC deposits. Individual FC deposits (in $ terms) fell USD1.7bn (-1.3%) weekly to USD132.8bn. Commercial institutions' FC deposits (in $ terms) declined by USD1.6bn (-2.0%) WoW to USD79.5bn. Lastly, official and other institutions' FC deposits (in $ terms) rose by USD35mn weekly (+0.7%).
Sharp 3.7% weekly rise in individual TRY deposits. On the TRY side, sector deposits rose by TRY118bn weekly (+2.3%). Individual deposits rose sharply by TRY101bn (+3.7%), while those of commercial institutions rose by TRY64bn (+3.6%) weekly. Other institutions' TRY deposits fell sharply by TR47bn (-7.0%) WoW.
Loan growth eased WoW. The sector's weekly TRY loan growth decelerated to 0.7% from 0.7% weekly. The sector's 13-week moving average (FC adj.) lending growth decelerated to 69.5%, vs. 72.1% in 4Q22. FC loans (in $ terms) fell 0.6% weekly. QtD growth on TRY side reached 6.6%. (4Q22: 16.7%).
Asset quality somewhat stable. The sector's NPL ratio was flat at 2.00% (4Q22: 2.09%). Stage 3 coverage was also flat at 87.1% WoW.
Steep rise in private deposit banks' FC net short position. State deposit banks FC net short position rose 20% weekly to USD963mn. For foreign deposit banks, it declined by 42% WoW to USD72mn. Lastly, private deposit banks' short position rose sharply by 97% weekly to USD495mn. The sector's net short position rose sharply by 28% WoW to -USD1.5bn. The sector's FC net general position/regulatory capital ratio rose to -1.6% from -1.3%. On a segmental basis, this ratio stands at -3.6% and -0.3% for state and foreign deposit banks, and -1.5% for private deposit banks, respectively.
Company News:
HalkBank (HALKB.TI; MP) has bought back 1.65mn of its own shares (0.03% of its paid-in capital) within a TRY10.96-11.13 share price range as part of its share buyback program of up to TRY250mn nominal shares and TRY2.25bn value. (Total amount bought: 115.6mn shares, which is 2.3% of its paid-in capital (Neutral).
VakifBank (VAKBN.TI; MP) has bought back 410K of its own shares (0.01% of its paid-in capital) within a TRY9.24-9.35 share price range as part of its share buyback program of up to TRY150mn nominal shares and TRY1bn value. (Total amount bought: 58.5mn shares, which is 0.82% of its paid-in capital (Neutral).

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