20180814-法国巴黎银行-Turkey__USDTRY_fair_value_–_a_scenario_analysis_10页_542kb

EM Strategy Desknote Summary: Turkey USDTRY Fair Value Scenario Analysis

Core Content Overview

This document, authored by Shaun Daly from BNP Paribas London Branch, provides an analysis of the fair value of the Turkish Lira (TRY) against the US Dollar (USD) using the BNP Paribas CLEER™ model. The analysis is based on two potential economic scenarios and highlights the current overvaluation of USDTRY forwards compared to the model's fair value estimates.

Key Information

• Current TRY CLEER™ Fair Value: 3.9 against the USD.
• USDTRY Spot Rate: Around 6.9, which is 77% overvalued compared to the fair value.
• CLEER™ Model: Stands for Cyclical Equilibrium Exchange Rate, a regression-based model that estimates fair value based on economic fundamentals. It is typically predictive over 6-24 months.
• Main Drivers: Inflation and growth variables are the largest coefficients in the model and significantly influence the fair value of the TRY.

Scenario Analysis

Two scenarios were analyzed to assess the potential impact on the lira's fair value:

Scenario 1: Central Bank of the Republic of Turkey (CBRT) Assumptions

• Growth Projection: 3% in FY 2019.
• CPI Forecast:
  • Peaks at 22.6% in Q1 2019.
  • Falls sharply to 12% in subsequent quarters.
• Fair Value Projections:
  • 2018 FV: 4.4
  • 2019 FV: 5.2
• Overvaluation:
  • 2018: 73%
  • 2019: 82%

Scenario 2: Stagnant Growth & High Inflation

• Growth Projection: Falls to 0% by the end of 2018 and remains stagnant in 2019.
• CPI Forecast:
  • Peaks at 25% in Q1 2019.
  • Falls linearly to 15% by the end of 2019.
• Fair Value Projections:
  • 2018 FV: 4.9
  • 2019 FV: 6.4
• Overvaluation:
  • 2018: 55%
  • 2019: 48%

Conclusion

• Despite recent depreciation due to geopolitical friction, the TRY is currently overvalued relative to the CLEER™ fair value.
• The model suggests potential for TRY appreciation if the Turkish economy follows either of the two scenarios analyzed.
• Market Uncertainty: The current fair value reflects a significant uncertainty premium, and upcoming economic data, such as the September medium-term plan from the Turkish Ministry of Treasury and Finance, will provide more clarity.

Legal and Disclaimer Notes

• This document is non-independent research and may be subject to conflicts of interest.
• It is a marketing communication and not investment research.
• BNPP does not provide investment, financial, legal, or tax advice.
• All information is based on public sources and may be subject to change without notice.
• No guarantees are made regarding accuracy, completeness, or future performance.
• The document may contain simulated performance data and is not intended as an offer to sell or purchase any financial instruments.

Contact Information

Additional Notes

• The document includes disclosures for U.S. and UK markets, highlighting potential conflicts of interest and the non-reliability of the information for investment decisions.
• It is intended for Professional Clients and Eligible Counterparties.
• The analysis is based on assumptions and simulations, and should not be used as a basis for actual investment decisions.

Document Date

• 14 August 2018

Disclaimer Summary

• No liability is accepted for any losses arising from reliance on the document.
• Information is provided for discussion purposes only and is subject to change.
• No guarantee of accuracy or completeness.
• No investment advice is given.
• Past performance is not indicative of future results.