Daily Market Watch 11/09/2013. Market Commentary. Headlines & Macroeconomic News Cautious comments by S&P. Corporate News & Trading Ideas.

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1 Daily Market Watch 12/09/2013 Market Commentary Positive mood in global equities prevailed as the threat of an imminent military operation on Syria faded, with President Obama postponing a congressional vote on the issue. Decline in dollar index and losses in gold market indicates that risk on mood continues. Turkish markets provide a mixed bag of signals. Despite the positive mood in global markets, Borsa Istanbul took a breather with some profit taking in banks. Turkish lira underperformed its EM peers as the CBRT resumed funding for lenders at its lowest interest rates. Rate market, on the other hand, was one of the best performers in emerging debt markets, with a 10bps rally in the two year benchmark note to 9.32% after the CBRT s resumption of cheap repo funding. We expect a positive opening around 72,000 in Borsa Istanbul tracking gains in Wall Street and Asian bourses. BIST-100 may breach over its technical resistance at 72,400 (50 days moving average) if the positive mood in European markets prevails and US 10 year bonds records further gains. Eyes will be on balance of payments data for July today on the local front. Consensus estimates indicates further widening in current account deficit to USD 5.5bn. On the global front initial jobless claims will be particularly important ahead of FOMC decision next Wednesday. Market Figures Close Daily 1M BIST-100, TRY 71, % -4.8% Trading Vol., TRM mn 3,842-3% 56.4% MSCI EM Free % 3.6% MSCI Turkey % -8.5% TRLIBOR, 3M% bps 45 bps Benchmark Bond bps 55 bps Eurobond bps 38 bps US$/TRY % 4.7% EUR/TRY % -0.6% BIST 2013E P/E BIST 2014E P/E MSCI Emerging Market Indices, in US$ terms /08/ /08/ /08/ /08/ /09/ /09/2013 MSCI EM Turkey MSCI EM Headlines & Macroeconomic News Cautious comments by S&P MSCI Sector Indices Best/Worst Performers Best 5 Daily Worst 5 Daily Pharm&Biotech 1.6% Tech Hard&Eqp -0.8% Hlth Care 0.9% Real Estate -0.1% Retail Index 0.6% Energy -0.1% Utility 0.5% Semiconductors 0.0% Public serv. 0.5% Tel. Svc. 0.0% Corporate News & Trading Ideas THYAO TI: Calendar THY and Privatization Authority has denied the news. Local Calendar 12/09/2013 Balance of Payments for July Global Calendar Exp. Pri. 12/09/2013 JN:Japan Buying Foreign Bonds ,5B JN:Japan Buying Foreign Stocks -- 9,6B JN:Foreign Buying Japan Bonds ,0B JN:Foreign Buying Japan Stocks ,5B US:Initial Jobless Claims Time:15: US:Continuing Claims Time:15: US:Monthly Budget Statement Please refer to important disclaimer at the end of this report. BIST-100 Best / Worst Performers Best 5 Daily Worst 5 Daily TAVHL 3% IPEKE -3% AKSEN 3% BRSAN -3% FENER 3% ZOREN -2% CIMSA 3% ANSGR -2% HLGYO 3% YAZIC -2% BIST-100 Top 5 by Trading Volume Ticker Close Daily Vol. (TRY mn) THYAO % 732 GARAN % 384 HALKB % 329 ISCTR % 259 AKBNK % 257 1

2 Corporate News & Trading Ideas Turk Hava Yollari [UPDATE] SPO rumours on THY THY and Privatization Authority has denied the news. Please find our previous announcement below According to mergermarket, SPO of Turkish Airlines (THY) will be on the cards. Based on undisclosed sources, shares will be sold about TL9.20/per share which is 35% higher than the current price. The report also mentions that, the investigation by the Turkish Competition Authority could take over a year to conclude. If a penalty implemented by the Competition Authority it would be about 0.5% and 3% of the revenues. We find the news highly speculative without any reliable source. THYAO TI OP 31% Upside (TRY) Current Target Price Mcap, mn 9,494 12,420 FF Mcap, mn 4,759 6,225 (x) 2013E 2014E P/E P/BV EV/EBITDA (TRY) 1M YtD Avg. Vol. Mn Relative Perf. % Headlines & Macroeconomic News Cautious comments by S&P Credit Rating Agency S&P published a report on the emerging countries, giving cautious messages about Turkey. Accordingly, rising real rates, slower loan growth and depreciation of the local currency are being pointed as the downside risks factors on growth. Indeed, S&P also noted the uncertainties about the economic outlook of Turkey with loaded election calendar and widening in the current account deficit front. S&P also warned against wider budget deficit to come. We agree with the S&P and say that lower consumption appetite to come and high public spending shall create a pressure over the fiscal front (nothing to hurt the debt dynamics tough). Yet, on the same day, Mehmet Simsek, Minister of Finance, spoke and said that fiscal performance would be stronger than the expectations. Minister Simsek also added that, applications for the recent so called wealth amnesty were high adding that de -facto inflow would matter soon. We welcome the cautious approach. 2

3 Currency F/X Data Change As of 11/09/2013 Close Daily YTD The greenback trades mixed against most of rivals and EM currencies as US Dollar Euro investors await the outcome of the Federal Reserve s meeting next week. Euro/US Dollar Yesterday, the dollar index fell 0.37% and 10 year UST yields fell by 5bps Equal Weighted Basket Source: Bloomberg to 2.88%. This is due to the speculation that the Federal Reserve will reinforce its commitment to keep benchmark rates at a record low in order to prevent a sharp rise in long-term interest rates on rate hike 1.4% Daily Performance Against US Dollar ZAR expectations. 1.2% PLN 1.0% Turkish lira halted its three-day-long rally as easing of Syrian concerns 0.8% INR CZK 0.6% RUB are already priced in and investors started to await the outcome of FED s BRL 0.4% HUF FOMC meeting. As 10 year UST yields came once again under 2.90% 0.2% UAH CNY and the dollar index is loosing ground, we expect some further 0.0% appreciation in TRY in the short run. -0.2% KZT Today, July balance of payments data will be watched closely, on the local front. US weekly jobless statistics will be today s main data points. Local Bills and Bond Turkish rates had a flat to positive day on the back of Turkish lira s flat performance against the dollar and the euro. As easing of Syrian concerns are already priced in, investors await the results of next week s FED FOMC meeting for a clearer guidance. We observe building up of speculations that the Federal Reserve will reinforce its commitment to keep benchmark rates at a record low in order to prevent a sharp rise in long-term interest rates on rate hike expectations. Such a scenario would be positive for Turkish rate market % TRY RON 0.3 Mil TL Daily Volume 13/05* yrs % 2-5 yrs TL Yield Curve FRN Coupon Zero Bill ARP We expect a flat to positive start in rate market as 10 year UST yields came once again under 2.90% and the dollar index is loosing ground,. Yields on the 2-yr benchmark note (TRT130515T11) ended the day 10bps down at 9.32%. Eurobonds As an imminent US military action in Syria seems less likely after Obama decided to put the vote on hold, there was a positive sentiment in EM eurobond markets yesterday. On the European front, UK and German 10 -yr notes yields went down by 1 and 4 bps respectively. US Treasury conducted the auction of the 10-yr note and raised in total USD21bn from the auction. The yield at the auction was formed at 2.946% (versus 2.62%) and bid-to cover was 2.86% versus prior 2.45%. Following the auction, 10-yr notes yield went down by 5 bps to 2.91%. As of this morning, they are trading 3 bps down at 2.88%. Turkish eurobonds resumed their rally as US Treasury yields came down on the speculations that the FED will reinforce to keep benchmark rates at record low levels in its forward guidance next week. Yields were down by 4-9bps across the yield curve. We expect positive mood to continue albeit low volume Bill Coupon Zero Month

4 Recommendations Local Rates: We keep our BUY call for long-term CPI linker notes. We downgrade our BUY call for medium term CPI linkers to HOLD. We upgraded our HOLD call for long term fixed coupon notes to BUY. Deposits versus short notes: We recommend deposits against shortterm notes as the decline in short term yields was not followed by deposit rates. 4

5 Most Traded Local Bonds & Bills Instrument Maturity Zero Coupon Bonds Term Amt Outstd. Daily Volume Weekly Volume Last Traded Price TRT110614T13 11/06/14 9 m 3, TRT060814T34 06/08/14 11 m 2, Simp. Yield Comp Yld Chg 1D (bp) Wk (bp) Low 3 mo Range High Avg Dur. Cnvx PVBP * 100 Coupon Bearing Bonds TRT080323T10 08/03/ y 14, , TRT050314T14 05/03/14 6 m 15, TRT130515T11 13/05/15 20 m 7, Rating Disclosure: Is Investment s ratings for the listed stocks are Outperform, Market Perform and Underperform, which are all benchmarked with the expected return of the Istanbul Stock Exchange (BIST 100). All these ratings are independently assigned by Is Investment equity analysts based on company s estimates which pertain to future earnings, cash flow and balance sheet of the company. Additionally, analysts may put the stocks Under Review on a temporary basis if conditions do not allow or restrict to make a proper assesment of the company. Investment Ratings for each individual company are assigned in accordance with the following criteria, i-) Outperform is assigned when the company s total expected return exceeds the target index return by 5% points ii-) Underperform is assigned when the company s total expected return remains 5% points under the target index return, iii-) Market perform is assigned when the company s total expected return remains higher than the target index return -5% points, yet below than the target index return +5% points. This report has been prepared by İş Yatırım Menkul Değerler A.Ş. (İş Investment) solely for the information of clients of İş Investment. Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and with the assistance of independent advisors, as they believe necessary. The information presented in this report has been obtained from public institutions, such as Borsa Istanbul (BIST), Capital Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in any way, nor may this information be printed for distribution purposes or forwarded as electronic attachments without the prior written permission of İş Investment. ( This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's. For more information, please visit Capital IQ's web site at 5