Turkey: Still room for regaining investors' confidence - BNPP

Sylvain Bellefontaine, Research Analyst at BNP Paribas, notes that following President Erdogan’s re-election and AKP-MHP’s victory in the parliamentary elections on June 24th, the Turkish markets reacted positively, welcoming the end of political uncertainty in the short term.

Key Quotes

“But the relief was short-lived. Over the past three months, the USDTRY has depreciated by 15% and the Istanbul stock exchange has dropped by 18%.”

“Meanwhile, 2-year government bonds yields have climbed by 450 basis points (bps) to 18.45%, against the backdrop of a significant, albeit late, monetary policy tightening, and 5-year CDS premia on sovereign Eurobonds have increased (+110 bps).”

“The government needs to address high macro imbalances (i.e. inflation and current account deficit), and a clear confirmation of the independence of the central bank is required.”