Turkey’s Explorer Spirit Rediscovery
Turkish shares continued to lead Europe with a 15 percent spurt as the Istanbul exchange will soon go public and Prime Minister Davitoglu released a medium-term economic strategy to hoist growth and further curb the current account deficit which has leveled to 5.5 percent of GDP on lower oil prices and consumer demand. A second sukuk bond was also snapped up after President Erdogan appealed to the investor base with the assertion that Moslems arrived in America before Columbus and that he would build a mosque in Cuba to honor the discovery. Present day geopolitics also proved controversial after attacks on visiting US sailors in the wake of a Treasury Department report on Islamic State fuel smuggling through Turkish intermediaries. Kurdish relations remain delicate after refusal to send troops across the Syrian border to hold Kobani as ill-equipped Peshmerga fighters try to regain ground with support from Western airstrikes. GDP growth is down to 3 percent but inflation with lira depreciation against the dollar touched 9 percent in October. The central bank has maintained multiple rates intact but recently moved to pay interest on reserves and aid export credit. Sales to Iraq and Russia are off but FDI was up 10 percent to $8.5 billion in the last quarter and record amounts have come in through the errors and omissions column to cover $150 billion in short-term mainly private debt on flat portfolio inflows. Sovereign bonds have been hurt by ratings agency caution over investment-grade status, although Fitch kept its reading and Moody’s delayed action with a negative outlook pending clarification of the surrounding conflicts. Officials have blamed the agencies for meddling in domestic politics and threatened to sever contact, and plan to reexamine their role in global markets as host of the G-20 summit next year. The group agreed in Australia to consider new sovereign debt restructuring approaches at Argentina’s urging, as the IMF formally adopted a preference for early maturity extension in unsustainable cases where Ukraine could soon qualify. According to estimates public debt/GDP is already above the 60 percent that would call in Russia’s emergency $3 billion infusion in the final days of the previous administration, as private issuers with Eastern operations seek relief and court default. In a workout Russian and Western bondholders would be forced to cooperate despite their countries’ strained ties which have sparked additional EU sanctions against rebel military chiefs.
Kazakhstan was the first to insert recommended clauses into bond contracts to avoid later legal complications, and the move allowed for a dual $2.5 placement after a 15-year absence. The benchmark intended to pave the way for corporate taps as oil price sluggishness and continuing problems at the largest field cut growth to 4 percent. Official have hedged the commodity risk with investment banks and will sell the electricity company and other state holdings on the slumping stock exchange to garner revenue and reprise pioneer popular capitalism from two decades ago.
