Turkish lira stability could be short-lived if CBRT fails to reverse course

Patrick Curran @ Tellimer Research

20 January 2022

Sovereign Analysis /

Turkey

This morning's briefing

EM central banks still ahead of the curve… but vulnerable as Fed lift-off nears. The real interest rate differential between EM and DM continues to rise and EM assets hold up well to a more hawkish Fed. However, it’s unclear when inflation will peak and persistently high inflation could de-anchor expectations in some EM. Looking ahead, EM central banks must remain vigilant as DM monetary tightening gathers pace in 2022, possibly requiring more hikes. Get the full story →

Arion Bank has had a strong year, with investors making it one of the top-performing emerging market bank shares of 2021. The bank is scheduled to release its FY 21 results on 8 February and, in his report, Tellimer's Rahul Shah explains what to expect. Get the full story →

Another China rate cut, and there's plenty more room for policy stimulus. Three days ago, the central bank's 1yr interest rate (on medium-term lending facilities that the government extends to banks) was cut by 10bps, for the first time since Q1 20. Today's rate cut is not a balanced one. The 1yr loan prime rate has been cut 10bps to 3.7% from 3.8%, while the 5yr loan prime rate cut is only 5bps taking it to 4.65%. Although the cuts are small, they should lower SME borrowing costs slightly, as well as mortgage rates for China's embattled property sector. China has plenty of room for monetary and fiscal stimulus, unlike in many other parts of emerging or developed markets. In our report published this week, we present 10 charts to illustrate the space for policy stimulus to counter China's slowing growth, and why that makes the risk-reward in equities attractive. Get the full story →

Alarm bells ring for oil importers. Oil is up over 10% this month, almost 25% above the 2021 average, and back at levels not seen since 2018 and 2014. Alarm bells are likely ringing for the oil importers in emerging markets, particularly those poorer ones also exposed to high food prices. Geopolitical risks (the impasse on the Iran nuclear deal, output disruption in Libya, Kazakhstan protests and succession, potential further sanctions on Russia, UAE drone attacks) should fade but low capex, resulting from the focus on the renewable energy transition, is likely to persist. In his latest article, Hasnain Malik has screened emerging markets for current account vulnerability to net fuel imports, and also identified the relatively cheap oil exporter equity markets. Get the full story →

US-based Oracle grabs a piece of the fast-expanding data centre market in Africa. Cloud infrastructure firm Oracle has opened its first data centre in Johannesburg, South Africa, joining a long list of companies that have set up shop to provide local cloud services across Africa, including giants like Microsoft and Amazon. Growing demand for faster computing from banks and telcos has attracted big cloud operators so far. We expect this trend to continue and, although there are as yet no listed commercial African data centre operators, investors should take note – the growing number of internet users, expansion of 4G coverage and 5G rollout makes data centres essential for Africa. Get the full story →

Senegal's local elections on Sunday come at a time of political tension. Senegal's municipal elections on Sunday are a crucial test before the parliamentary elections this summer. They come at a time of heightened social and political tensions, fuelled on one side by Covid-induced hardships, and on the other by the growing dissatisfaction with President Macky Sall and the ruling political elite. Sall has taken an increasingly authoritarian grip on power, with undue pressure on the opposition, politicisation of the judiciary, controversy surrounding the conduct of the latest two elections, and ambiguity around his intention to run for a third mandate (which is forbidden under the current constitution). In addition, the independence of the electoral committee, CENA, has been questioned given that the president appoints all of its members. Sunday will test the authorities' willingness and capacity to conduct free and fair elections, either mitigating or adding to tensions in the run-up to July's poll. Get the full story →

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