Morning Note /
Turkey

Turkey: We expect the weakness in equities to continue

  • CBT Governor’s speech caused jitters that an earlier than expected rate cut could be in the works as early as Sep

  • We would not expect CBRT to cut rates before seeing September inflation in the September meeting

  • October cut has become highly likely, putting further pressure on the Lira if global strength of DXY continues

ATA Invest
9 September 2021
Published byATA Invest

Global risk-off and CBT Governor Kavcıoglu’s strong underlining of using core inflation rather than headline for monetary policy framework caused jitters that an earlier than expected rate cut could be in the works as early as September. Despite a higher than expected August inflation pulled annual inflation to 19.25%, Core C series had declined to 16.76% from 17.22%. We would not expect CBRT to cut rates before seeing September inflation in the September meeting but an October cut has become highly likely, putting further pressure on the Lira if the global strength of DXY continues.

We expect the weakness in equities to continue today with weak attempts for a rebound, after the critical 1444 level did not hold. ECB president Lagarde’s remarks about inflation will be closely watched today and it could either help stabilize the markets or create further sell-off.

Company news:

*KCHOL: bought back 200k shares at an average price of TL22.27 on 08 Sep 2021. Since 02 July 2021, the total number of shares bought back reached 400k at an average price of TL20.91.

*ARCLK: bought back 2,000k shares at an average price of TL31.94 on 08 Sep 2021. Since 02 July 2021, the total number of shares bought back reached 15.1mn at an average price of TL32.37.

 *PGSUS TI> Total PAX was up by 54% y/y to 2.6mn in August. On a segmental basis, domestic PAX was up by 22% y/y in August 2021 while international PAX was up by 133% y/y during the same period. International share in total ASK was up to 71% in August 2021 from 55% a year ago. Total load factor (LF) was up by 503bps y/y to 82.6% in August 2021 due to 750bps and 650bps increase in domestic and international load factor, respectively. Although load factor in August 2021 is 82.6%, when we adjust this KPI for aircrafts on the ground by dividing PAX in August 2021 to seats of August 2019, we find a load factor of %77.6. We believe load factor is flat m/m in August 2021. Currently, we expect 2021E ASK to be 32.3bn compared to 22.3bn in 2020 and 2021E load factor to be %80.4 compared to %80.2 in 2020. We also expect total PAX to increase to 20.2mn in 2021E from 14.7mn in 2020. Recall that total PAX of 14.7mn in 2020 was 52.2% below total PAX of 30.8mn back in 2019. We believe it might take several years to catch 2019 PAX figures depending on the pace of easing in Covid-19 restrictions.

Weekly Agenda:

Sept 10: July unemployment rate( June 10.6%)