MEHMET
ÖZKAYA

Faiz piyasasına dair Kasım´da belirttiğim görüşlerimi koruyorum. Likidite maliyetinin yüksek kalmasını hatta daha da artmasını bekliyorum. Gösterge tahvil faizi yüzde 11.50-12 civarında stabilize olacaktır. Yıl içinde bunun aşılması ihtimali var. Mevduat ve kredi faizlerinde de benzer bir süreç olabilir.

TL´de temel tetikleyicinin küresel risk iştahı olacağını düşünüyorum. Yılın başlarında küresel piyasalarda daha fazla riskten kaçınma olmasını ve TL´nin baskı altında kalmasını bekliyorum. Orta vadede görüşlerim yapıcı ve TL´nin ikinci yarıda sürdürülebilir yükseliş trendine girmesini bekliyorum.

Yatırım açısından TL varlıkları için görüşüm negatifti. Bu süreçte TL varlıkları ciddi oranda düzeltme gördü ve değer açısından daha az talepkar hale geldi. Ayrıca TCMB gerekli adımları atmaya başladı. Piyasa görünümüne dair görüşüm görece daha yapıcı. İlk aylarda yaşanacak satışlar uzun vadeli yatırımlar için iyi bir giriş noktası olabilir.

Yeni yıla güçlüklerle başlasak da yılsonunu daha mutlu bitireceğimize inanıyorum.

İNGİLİZCE TAM METİN

The Unfinished Adjustment and the Market Outlook

As we start a new year, I would like to provide a short review of market developments in 2011 from my own perspective and then a summary of my outlook for the first half of 2012.

i) 2011: Unmatched Expectations

In many respects, I was expecting 2011 to be a year of adjustment for the Turkish economy thru a transition from low inflation to high inflation, from accommodative policy to tight policy, and from rapid growth to a moderate but more sustainable growth. An essential component of these expectations was my belief (I guess, you can now call it wishful thinking) that the policy makers would have engineered a gradual but meaningful tightening cycle.

Based on these expectations, I have had bearish views for rate markets throughout the year. Even after the benchmark bond yield sold off from 7% in January to 9.2% in April, a level that was assumed to be the peak by many market participants at the time, I called yields to break higher. I was also concerned that in the absence of a pre-emptive gradual tightening, we were likely to experience a disorderly sell-off in Turkish assets.
Unfortunately, the Central Bank (CBT) opted to limit its tightening efforts within the scope of reserve requirements only and even cut the policy rate further in early August. CBT’s dovish communications in July and the following rate cut in August were the last token in a series of missteps in my view. No surprise that Turkish assets were sold off sharply thereafter. CBT’s initial response to the sell off came in the form of liquidity enhancing measures while neglecting the issues around policy credibility. The Central Bank finally gave in mid-October and decided to address the real concern of investors. The Bank shifted its focus back to rapidly rising inflation and started tightening the policy in its own way thru the interest rate corridor, arguing for its flexibility. I had the view that in order this approach to work out, “CBT has to be harsh with liquidity and ensure high levels of overnight repo rate for a prolonged time”. Moreover, “this unusual way of tightening would have more severe implications for the real economy than a traditional policy rate hike”. The high flexibility that CBT desires comes at a cost of higher risk premiums – there is no free lunch.

In conclusion, refraining from a gradual policy tightening early in the cycle with the fear of growth implications, CBT was forced to adopt a shock therapy later just at a time when global economic outlook started deteriorating. As a result, we are entering 2012 with a monetary policy that is out of sync with the global economic cycle.

ii) 2012: The Unfinished Adjustment

The adjustment that I was hoping to take place in 2011 will be completed this year albeit in a disorderly fashion. The policy tightening implemented since October will be increasingly felt in the real economy going forward. We will see that economic growth will slow down further and will come a point of halt in the first half. During this phase, inflation is likely to remain at elevated levels tough.

Unfortunately, the inflation level and its trend will prevent the Central Bank to respond to the coming economic slowdown. In its most recent communications, CBT has also alerted that inflation trend will not reverse before May. This means that we should not expect any meaningful easing in the monetary policy anytime soon. On the contrary, if CBT really aims to achieve its year-end inflation target, tight monetary policy has to continue even beyond the first half. My guess is that CBT will make a compromise in order to support economic growth and let inflation stay above its year-end target within a declining trend. Accordingly, I think that the monetary policy will start easing (read narrowing of interest rate corridor thru cuts in lending rates) as inflation peaks. I also expect further cuts in reserve requirements before that, probably in the first quarter.

iii) Market Outlook

Based on this macro outlook, I maintain my view on rate markets that I outlined back in November. I expect that the cost of liquidity will remain high and is likely to get even higher. Benchmark bond yield will stabilize around 11.50%-12% (comp.) levels overtime and the long-end of the curve will remain inverted. Nevertheless, there is a good chance of an overshoot early in the year. We may see a similar pattern in deposit and credit rates as well.

In regards to the Turkish Lira, I believe that the main driver will be global risk appetite as opposed to local dynamics (which were the main determinant for the value of TRY in 2011). As I expect further risk aversion in global markets in early months of the year, TRY may remain under pressure.7 Over the medium term, tough, I am quite constructive, expecting TRY to initiate a sustainable appreciation trend in the second half of the year.

From an investment perspective, I have had quite a negative outlook for TRY assets throughout last year. During this time, TRY assets have indeed corrected significantly, becoming less demanding in terms of valuations. In addition, CBT has started taking necessary actions recently. Accordingly, my market outlook has become relatively more constructive. I believe that a further sell-off in early months of the year will provide a very good entry point for long-term investments in TRY assets, including credit and equities.

Overall, we may be heading to a difficult start in the New Year, but will hopefully have a happier ending.

Best wishes to you all for 2012.