20171201-法国巴黎银行-Morning_Meeting_Notes_8页_472kb

Summary of EM STRATEGY | TURKEY DESKNOTE (01 December 2017)

Core Content

This document is a desk note from Turk Ekonomi Bank A.S. (TEB) and BNP Paribas, summarizing the key economic and financial developments in Turkey as of 1 December 2017. It includes market data, FX and interest rate trends, and a review of the current economic outlook. The note also contains legal and regulatory disclosures relevant to the distribution and use of the document.

Main Points

1. Data Agenda and Economic Indicators

• Istanbul CPI: Expected to rise by 1.2% month-over-month (m/m), pushing annual inflation to 12.7%.
• Manufacturing PMI: Likely to drop from 52.8 in October due to financial market volatility, indicating a potential economic slowdown in the coming months.
• Preliminary Exports for November: Expected to increase to USD 13.5bn, up from USD 12.8bn in the same period last year.

2. Offshore and Local FX Flows

• Offshore flows have stabilized in recent weeks, with a small increase in bond and equity investments.
• Local investors have been cautious, increasing FX deposits by USD 1bn in the week ending 24 November.
• This suggests that locals may be reversing previous FX sales and looking for opportunities to re-enter the market.
• The stabilization of offshore flows and the increase in local FX deposits are expected to limit the short-term upside for the Turkish Lira (TRY).

3. Foreign Trade Deficit

• The October foreign trade deficit increased by USD 3.1bn year-over-year (y/y) to USD 7.3bn.
• Annualized foreign trade deficit reached USD 71bn, up from USD 56bn last year.
• USD 14bn of the increase is attributed to gold and energy imports.
• Core deficit (excluding gold and energy) declined by USD 3bn to USD 31bn, but has started to deteriorate in recent months.

4. Industrial Production and Imports

• The increase in imports of intermediate goods (excluding gold and energy) by 40% y/y in October signals another double-digit growth in industrial production.
• This growth is expected to support a strong start to the fourth quarter (4Q).

5. FX and Interest Rate Market Overview

• USDTRY and EURTRY have seen negative movements in both daily and weekly changes.
• The BASKET index also showed a decline.
• CBRT's Average Repo Funding Rate is presented, highlighting the central bank's stance on liquidity.
• The Government Bonds Yield Curve and FX ATM Vol Curve are included to illustrate market sentiment and expectations.

6. Portfolio Flows and Carry Trades

• Offshore investors increased their bond portfolio by USD 0.1bn and equities by USD 0.2bn.
• Carry trades increased by USD 0.5bn, resulting in a total inflow of USD 0.9bn over the last two weeks.
• This suggests some renewed interest in Turkish markets following a major sell-off since mid-September.

Key Information

• The foreign trade deficit has been rising, especially due to gold and energy imports, which are expected to continue affecting the balance of payments.
• Local FX deposits have increased, indicating a shift in sentiment and a potential reversal of previous selling.
• The manufacturing PMI is expected to drop, signaling a possible slowdown in economic activity.
• The FX market shows mixed trends, with offshore flows stabilizing and local flows increasing.
• The CPI is expected to rise, contributing to higher inflation.
• The government bonds market shows declining yields and increasing spreads, indicating lower investor confidence.
• The ATM volatility for USDTRY has decreased, reflecting reduced market uncertainty.

Contacts

Legal and Regulatory Disclosures

• The document is non-independent research and marketing communication.
• It does not constitute investment research under MiFID.
• BNP Paribas may have conflicts of interest and may engage in transactions that are inconsistent with the views expressed.
• The document may contain simulated performance data and is not intended as an offer to sell or investment advice.
• It is intended for professional clients and relevant persons only.
• No liability is accepted for any use or reliance on the information.
• The document is strictly confidential and may not be reproduced or distributed without prior written consent.

Conclusion

The note provides a comprehensive overview of the current state of the Turkish FX and bond markets, with a focus on the recent data releases and investor behavior. It highlights the stabilization of offshore flows, the increase in local FX deposits, and the expected rise in CPI. The manufacturing PMI and foreign trade deficit are also discussed, indicating potential economic slowdown and external imbalances. The document serves as a marketing communication and should not be relied upon for investment decisions without further due diligence.