All the articles and researches on the emerging markets have a common phrase: "The prices are very cheap." Indeed these markets are cheap but they do not guarantee a rally. There is an absence of a trigger in the emerging markets and in particular in Turkey that would create a rally in the financial assets. Quite the contrary; the risks outweigh everyday.
The CPI level of February will not support the markets in terms of a buy. The heavy reimbursement of the Treasury who is in need of borrowing is going to have a hard time in March. The Treasury has an accumulation of debt of 30 billion TL in the account of the Turkish Central Bank but the interest rates jump when the foreigners do not participate in the auctions. The most likely scenario would be the rise to 12% of the benchmark of the compounded interest rate of 2 years bond during the month of March.
The ISE-100 is oscillating in a narrow band with a noticeable contraction in the volume of transactions for there no story that can move the market. The financial results of 2013 are not bright and the eyes are turned towards the profits of the year 2014-2015. We will be able to evaluate as to how much the ISE-100 is cheap by the disclosure of March's economic data. In case that the economic contraction exceeds the expectations, we may see a drop in the ISE-100 with the downside revision of the profits.
The elections as well as the strife in the politics constitute a big threat. With the uploading of the first audio recording between the Prime Minister and his son on the Youtube has broken upwards the USD/TL trend. This cycle will set as a model for the month of March. The Gulen movement will feed the press with evidences that will undermine the confidence in the AKP. There is a serious probability that in retaliation to this, the AKP starts the gang related inquiries concerning the Gulen movement or gives a hard time to TUSKON - TUSIAD or the press thus disrupting the morale.
The markets will attempt to hold and go up with the momentum incoming from the exterior, or with data that exceed optimistically the expectations in the economy. Because Turkey is in the middle of the biggest political crisis in its recent history, it is hard to believe that these efforts will ever be successful. The market outlook will become clearer only after end of the local election of March 30th. Until then, nothing will be cheap at any price...
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