Morning Note /
Turkey

Turkey: We expect a flat opening

  • TL keep weakening and TL/USD rate came close to physiological level of 10

  • There are no additions or deletions of Turkish equities from the MSCI index from the quarterly review

  • Daily support and resistance levels are 1,615 and 1,635-1,640 respectively

Batuhan Ozsahin
ATA Invest
12 November 2021
Published by

Despite the efforts to keep the index rising, profit taking sales at 1,640 resistance brought BIST 100 Index back to 1,625 level yesterday. TL keep weakening and TL/USD rate came close to physiological level of 10. There are no additions or deletions of Turkish equities from the MSCI index from the quarterly review. Today we expect a flat opening in the market. Daily support and resistance levels are 1,615 and 1,635-1,640 respectively.

Macro news:

Current account (C/A) surplus realised as US$1.65bn in Sep’21. (Bloomberg Cons: US$1.25bn) In Sep’21, there was a net inflow of US$1.2bn to portfolio investments (Aug’21:US$1.3bn). 12M Trailing Current Account Deficit realised as US$18.4bn in Sep’21. 12M Trailing Current Account Deficit/GDP ratio realised as 2.4% in Sep’21. We expect Current Account Deficit (C/A) and CAD/GDP to be US$16bn and 2.1%, respectively in 2021.

Company news:

*THYAO TI> PAX Trends - Total PAX increased by 111% y/y to 5.1mn in October 2021... <Slightly Positive> In October 2021, domestic PAX was up by 62% to 2.1mn which was 83% of its 2019 level. In October 2021 direct international PAX was up by 173% y/y to 1.7mn which was 94% of its 2019 level. In October 2021, transit PAX was up by 163% y/y to 1.3mn which was 58% of its 2019 level. Available seat km (ASK) increased by 122% y/y in October 2021 to 13.9bn which was 84% of its 2019 level. Total load factor increased by 343bps y/y to 69.9% in October 2021 due to 312bps and 436bps y/y increase in domestic and international load factor, respectively. Although load factor in October 2021 was 69.9%, when we adjust this KPI for aircrafts on the ground by dividing revenue passenger km (RPK) in October 2021 to ASK of October 2019, we find a load factor of 58.5%. Considering adjusted load factor was 55.7% in September 2021, we believe there is a m/m improvement in load factor trends. Turkish Airlines stopped providing guidance due to Covid-19 at 1Q20, and no guidance was shared with 3Q21 results about 2021E and 2022E. Currently we expect 2021E ASK to be 124bn compared to 75bn in 2020 and 2021E load factor to be %69 compared to %71 in 2020. We also expect total PAX to increase to 43mn in 2021E from 28mn in 2020. Recall that total PAX of 28mn in 2020 was 62.4% below total PAX of 74.2mn back in 2019.

HALKB: Halkbank reported 3Q21 net income of TL92mn (+ 44% q/q and -71% y/y), compared to our estimate of TL88mn and consensus estimate of TL88mn. Key highlights of 3Q21 results are 1) Although there is a slight improvement, ROE of 0.9%( 2Q ROE 0.6%) remains unacceptably low compared to peers 2) Pre-provision income improved from negative TL437mn in 2Q to TL814mn in 3Q but pre-provision income declined 81% y/y in 9M21. Halkbank shares trade at 0.2x 22E P/B, fairly reflecting the largest COE-ROE spread in our coverage universe. As a result, the shares are down 19% year-to-date vs. a 22% increase in BIST-Banks index. The case against Halkbank in the US will continue in June but even apart from a potential fine, Halkbank is the most thinly capitalized among peers and it will have less of a room for improvement in sequential profit growth going forward. We maintain our Underperform rating

Weekly Agenda:

12 Nov: November CBRT Macro Expectations Survey

12 Nov: September Industrial Production (Consensus -0.7%)