20180102-法国巴黎银行-Morning_Meeting_Notes_8页_469kb

Summary of EM STRATEGY | TURKEY DESKNOTE

Core Content

This document provides a strategic analysis of the Turkish lira (TRY) and inflation outlook for December 2017, with implications for the currency and broader economic conditions. It outlines the Central Bank of the Republic of Turkey's (CBRT) forward foreign exchange (FX) sale auction schedule, the potential impact of inflationary pressures on the TRY, and the risks associated with minimum wage hikes and electricity price increases. The document also includes legal and compliance notices related to the use and distribution of the information.

Main Points

FX Auctions Schedule

• The CBRT has announced the schedule for lira-settled forward FX sale auctions until the end of March.
• The auctions are structured as follows:
  • 1-month auctions on every Monday, Tuesday, and Thursday.
  • 3-month auctions on every Monday.
  • 6-month auctions on every other Monday.
• The outstanding amount of auctions will increase from USD 3bn to USD 4.4bn by the end of March.
• Today's auctions include:
  • USD 150mn of 1-month FX sale.
  • USD 100mn of each 3-month and 6-month FX sale.
  • Total auction amount is USD 350mn.
  • There is also a USD 150mn redemption, resulting in a net issuance of USD 200mn.

FX Market Implications

• The timing of the auctions creates intraday volatility in the TRY due to the uncertainty surrounding the ability of local banks to roll over FX forwards.
• Banks may preemptively buy FX in the morning to hedge against potential short positions created by FX forward expirations.
• If banks win bids in the CBRT auctions, they may sell the FX they previously bought, potentially supporting the TRY.

Inflation Outlook

• The December CPI is expected to rise by 0.7% m/m, higher than the market consensus of 0.5% m/m.
• This would bring the annual inflation down to 11.9% y/y, from 13.0% y/y in November.
• Food inflation is a key driver, with leading indicators from ITO and Turkis suggesting upside risks.
• The Turkis reported a 2.6% m/m increase in the minimum income needed to avoid hunger, indicating a worsening food inflation outlook.
• Vegetable prices increased by 6% m/m, and fruit prices by 19% m/m, further supporting the inflationary pressure.
• The ITO's Istanbul CPI showed a 1.4% m/m increase, which is less downbeat than the 3.0% m/m increase a year ago, but this was influenced by tax exemptions on tobacco.
• The headline inflation is expected to fall in the coming months due to base effects, but underlying inflation trends are still worsening.

Additional Inflationary Pressures

• Electricity prices increased by 8.8% in January, which will add 0.24pp to headline inflation.
• The minimum wage hike of 14.4% in 2018 is higher than last year's 8.0% but lower than the 2016 hike of 30%.
• This worsens inflation expectations and risks the unit labor cost.
• Higher labor costs could reduce international competitiveness, leading to currency depreciation if productivity does not offset the costs.
• The unit labor cost based real effective exchange rate (REER) index for TRY has remained stable, while the CPI based REER index has declined to its lowest level since 2002, indicating a deteriorating inflation outlook.

Key Information

• Inflation drivers: Food prices, electricity costs, and minimum wage hikes are key factors affecting inflation.
• FX volatility: The CBRT auction schedule and the timing of FX forward expirations are expected to increase TRY volatility.
• Economic outlook: While headline inflation is projected to fall, underlying inflation trends remain concerning.
• Market participants: The document is produced by BNP Paribas and intended for professional clients and eligible counterparties.

Legal and Compliance Notices

• The document is non-independent research and may be subject to conflicts of interest.
• It is a marketing communication and not investment research.
• BNP Paribas may make a market in the securities mentioned or act as an advisor.
• The document may contain back-tested performance data, which is illustrative only.
• It does not constitute a prospectus or public offering.
• The information is not intended for non-Relevant Persons and is strictly confidential.

Summary of Risks

• Inflation risks: Higher food and wage costs, along with electricity price hikes, may increase inflationary pressures.
• Currency risks: The TRY could face downside pressure due to FX market dynamics and worsening inflation outlook.
• Market risks: Transactions involving the discussed products may involve high volatility and significant risk.
• Conflicts of interest: BNP Paribas may have financial interests in the securities or companies mentioned, leading to potential conflicts.

Contacts

This summary highlights the economic and FX market dynamics in Turkey, along with the inflationary pressures and legal compliance aspects of the document.