Turkish markets started the day on a bullish note on Monday, but slumped across the board, as Ankara continued to emit confusing signals about the pri...
The lira opened strong on the developments, with dealers quoting TL1,120,000 against the US$ on Monday morning. CBT sold US$50mn in its daily auction, where the exchange rate fell to 1,147,000/US$ from 1,157,000 on Friday. Actively traded October 10, 2001 t-bill advanced to 88.4% compounded, breaching the resistance at 90%. Investors flocked to Turkish stocks in the morning session, passing the National-100 Index over the 13,000 benchmark in the first hour of trading.
The moods soured over the course of the day, as economy minister Dervis admitted that last minute complications emerged in the privatization of TT. Bullish sentiment was undermined further, as state sector labor unions turned down the administrations offer and threatened a national strike. On the positive side, the cabinet spokesman announced that a compromise was reached on the Amendments to the Banking Law, another pre-condition for the IMF loan.
Markets panicked on Monday afternoon, afraid that Transportation Minister Öksüz will once again stonewall the privatization of TT, sinking the IMF deal. The ISE shed 2.6% in middling volume, but bank stocks mostly held their ground. The lira lost some ground on Monday afternoon, but dealers remained firmly convinced that the deal will go through, bolstering CBTs F/X reserves. The bond market was steady in the afternoon as investors focused on tomorrows 10-month bill auction, where the Treasury plans to raise at least TL600 trillion.
As we go to print, coalition leaders were still meeting to iron out the problems in the TT privatization. A break-through could improve sentiment tomorrow. Bond investors will also eye the Treasury auction, where the Treasury Undersecretary will offer the longest maturity since the February crisis. The market is betting on an average compound yield of 90-85%, but retail demand is questionable, which could raise rates. Finally, markets will hear form the Chief Prosecutor in the long-forgotten Virtue Party case, which will then move to verdict stage. An announcement that the Chief Prosecutor is reducing charges against the party could be received favorably.
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