Turkey ink says that the crisis prompts speculation salvation

  • Turkey ink says that the crisis prompts speculation salvation
    Independent.t. E.
    Desperate measures are in the air in Turkey: trading rooms are filled with talk about aid from the International monetary Fund and potential control over the movement of capital. But there is a vacuum at the heart of economic policy.
    https://www.independent.ie/business/world/turkey-inc-reeling-as-crisis-prompts-bailout-speculation-37197625.html
    https://www.independent.ie/business/world/article37197624.ece/2d139/AUTOCROP/h342/2018-08-09_bus_43121546_I1.JPG

  • Email

Desperate measures are in the air in Turkey: trading rooms are filled with talk about aid from the International monetary Fund and potential control over the movement of capital. But there is a vacuum at the heart of economic policy.

The Central Bank and the government remained largely silent as the Currency fell to record lows and the US have imposed sanctions and threatened more. Lira rebounded after falling the most in a decade on Monday, will take from the news that the Turkish officials headed to Washington for talks. The yield on 10-year bonds rose above 20pcs at an all time high.

Control over the movement of capital is now “more than a tail-risk scenario is now until the authorities show no signs of a return to more Orthodox policies,” said Shamaila Khan, Director at AllianceBernstein emerging markets debts in new York. What Lyra really needs is “Central Bank independence, fiscal tightening and the IMF program,” she said.

Late in the evening on Tuesday, the IMF issued a statement that it “has not received any instructions from the Turkish authorities that they consider requests for financial assistance.”

Meanwhile, press Secretary, U.S. Department of State Heather Nauert said that the call by Secretary of state Mike Pompeo, Minister of foreign Affairs of Turkey Mevlut Cavusoglu yesterday was generally “a good sign”.

However, the radio silence from Ankara is deafening. Turkish President Recep Tayyip Erdogan, who won almost absolute power in elections in June, is an outspoken critic of rising interest rates, and investors worry that he might stand in the direction of the Central Bank.

“It is very difficult to foresee the about-face of power,” said Hammarlund, head of emerging markets strategist at SEB in Stockholm. “At a time when Turkey will be forced to turn to the IMF for support is approaching.”

Lira bent under the weight of one of the widest current account deficit in emerging markets and inflation spirals higher and higher. As of July there were more than three times, the objectives of the Central Bank, driving real interest rates below 2pc, the lowest level since Dec.

Ten-year yields declined 19 basis points after earlier rising as much as 42 basis points to a record 20.09 PC; the core index of shares rose more than 2pc.

Although investors insist on a significant increase in rates from the Central Bank, there is a growing consensus that it’s going to take more than monetary policy to turn the tide.

“It will be a shock of one type or another: either a policy or macro shock or some combination of the two,” said Christopher Granville, managing Director for EMEA and global political studies at Lombard vehicle in London. “But the way to sugar that pill” he said it would be “a political compromise with the West. That would make the pain a lot less.”

Turkey’s Deputy foreign Minister Sedat Onal was at the head of the delegation with representatives of the ministries of Finance, justice and ministries of foreign Affairs, Ministry of foreign Affairs in Ankara, the statement said, fueling speculation that a deal to mend relations strained by Turkey’s detention of American pastor may be in the works.

The United States remains a reliable friend and ally of Turkey, the U.S. Embassy in Turkey said in his Twitter post, it denied news in the Turkish media that a U.S. official predicted the Lira would weaken to 7 per dollar.

On Monday, the Central Bank increased the banks ‘ access to dollar liquidity at $2.2 billion, in an effort to take some Pressure off the Lira. The currency reduced its losses for a while, only to plunge to successive record lows at night, as investors considered the move as evidence that hands were tied.

The collapse of the Lira not only harms consumers mood and purses, but he pushes corporate balance sheets further over the edge. Companies that borrowed heavily in foreign currencies, now face a growing burden due to tanking Lira. Turkey Inc is burdened with $337bn of foreign currency liabilities, with the shortfall of 217.3 billion. in net assets, according to Central Bank data. Bank borrowing costs have also been rising ahead of more than 100 billion dollars. debt that must be paid during the year.

“It will remain so as long as the Central Bank commits irrevocably to raise rates and keep them at a high level until inflation has become,” Henrik Gullberg, a strategist from Nomura International, said by e-mail. “The market needs that kind of hard commitments.”

Investors are watching to see whether Turkish banks will maintain access to foreign funding, they must keep economic activity humming.

Turkish lenders have a good record of external borrowing even in the midst of the financial crisis and is strong enough to weather the slowdown, according to executives of the Bank. But the nature of the current crisis increases the likelihood of new external shocks, mainly from the U.S., which is battling an economic attack against Turkey for the deprivation of liberty of American citizens.

Even if foreign banks continue to lend to their Turkish colleagues, “the costs will rise and access to markets is difficult, many investors are not willing to increase their exposure to Turkey,” said Trieu femme, emerging market credit strategist at ING Bank NV in London. “If sanctions were applied against banks, what will happen in the worst case given the high external financing needs, but it’s not a likely scenario now.”

Last week, the US began to pressure on sanctions against the two Ministers, and on Friday he announced a review of the duty free trade of about $1.7 billion in Turkish exports. The Turkish government is trying to negotiate aid two directions of investigation of the state Bank turkiye Halk, but Secretary of state Mike Pompeo has already warned Turkey that “they ran out” for a period, to set the captives free.

The leaders of the two largest banks in Turkey say they are still able to borrow.

“There’s no question whatsoever regarding the acquisition of” TAS Akbank chief Executive officer Hakan Binbasgil said July 25 during a teleconference after the first half Bank earnings. Akbank lent a total of $1.15 billion in syndicated loans in August 2017, $945m of which will ripen in September, according to the state registration.

Turkey Garanti Bankasi General Director Ali Fuat Erbil said a strong relationship will allow banks to roll over loans even amid unstable economic environment. “The most difficult day, I remember in 2008 and 2009, our ratio of tipping around 88pc, not below 80pc,” Mr Erbil said in a teleconference earnings on July 26.

Fitch downgraded Turkey, and then 24 Turkish banks further into junk in July, saying that the tightening of financing conditions and the weaker economy is likely to hit the banking sector.

Even the ratio of rollover 100pcs does not satisfy the needs of Turkey during the weak capital inflows, according to Inan Demir, an economist at Nomura. “Investors look to be restructured and their impact on banks ‘balance sheets and creditworthiness very carefully”, he said. “I don’t know when it will have a negative impact on external borrowing, but we can’t say that they will not have any impact on the appetite of foreign creditors.” (Bloomberg)

Online Business Classes