Cyprus-Forum.com

[Maximus]

Poverty threshold continues to rise in Turkey

http://www.hurriyetdailynews.com/povert ... sCatID=344

[Demonax]

Loss of confidence now taking hold...

Abu Dhabi withdraw from $12 Billion Turkish Energy Project

Turkey’s currency recently fell to record lows after an emerging market sell-off, and the country’s economy looks unlikely to grow, not the best environment to begin a multibillion dollar project, and likely the reason why Abu Dhabi National Energy Co. (TAQA) has postponed an investment decision, with the possibility of cancelling the project in the future.

In January TAQA agreed to work with the Turkish state-owned Electricity Generation Co. to develop a $12 billion energy project that would see the development of several power plants which would burn lignite coal, mined from the Afsin-Elbistan region in Turkey.

Investment in emerging markets such as Turkey has been hit hard, as companies fear a reduction in available cheap cash on the market as the US Federal Reserve plans to reduce its monthly bond-buying program. An industry source told Reuters that “what we have been picking up from them recently is that they are looking at an eventual pull out. This was such a large-scale project, whose future was very much dependent on market conditions.”

Another source explained that “it was never realistic to see this project as something that one company alone could carry out ...Now with the changing climate towards emerging markets and Turkey, investors question the return.”

http://oilprice.com/Latest-Energy-News/ ... oject.html

[Demonax]

And this is why...

Turkey’s debt risk near 14-month high as reserves drained

Istanbul, Bloomberg—Turkey’s default risk approached a 14-month high, underperforming similarly rated peers, as the central bank’s reluctance to raise interest rates to stem the lira’s drop risks diminishing foreign reserves.

The central bank has spent USD 8.3 billion since June 11 to shore up the lira, which fell to a record. Turkey’s credit- default swaps, contracts insuring debt against default, have risen 40 basis points this quarter to 231 at 10:16 am in Istanbul. That compares with a nine basis-point drop in swaps for Romania, which like Turkey is rated Baa3 at Moody’s Investors Service, the lowest investment grade. Contracts for Russia, rated two levels higher, rose three basis points to 199.

Turkey cannot rely on currency intervention to protect financial stability as its reserves of USD 109 billion are insufficient, according to Standard Bank Plc and GAM Investment. Foreign-exchange reserves are dwarfed by Brazil’s USD 374 billion and Russia’s USD 480 billion. The lira has sunk 7.3 percent in the last three months to a record in the biggest decline among emerging markets in Europe, the Middle East and Africa.

“It is fundamentals, especially the speed that Turkey’s burning through reserves,” which are driving default swaps higher, Paul McNamara, who manages USD 9 billion in emerging-market debt at GAM Investment in London, wrote in e-mailed comments August 23.

The cost to protect Turkish bonds rose to as high as 247 basis points on August 22, the most since June 2012. The lira reached a record low of 1.9992 against the dollar on August 23, before trading at 1.9922 Monday. The country’s debt is ranked at the lowest investment grade by Fitch Ratings and is assigned the top non-investment grade at Standard & Poor’s...

The central bank has “days or weeks at most” to continue with dollar sales at current volumes, Nigel Rendell, a senior analyst at Medley Global Advisors in London, said by e-mail Aug. 23. “They’ve spent USD 7 billion to USD 8 billion and have nothing to show for it. In the present markets, it’s little more than squandering dollars.”

http://www.aawsat.net/2013/08/article55314888?

[Demonax]

From the WSJ:

Lira Falls as Turkey's Central Bank Gov. Rules Out Rate Hikes

ISTANBUL—The Turkish lira plunged to record lows Tuesday after comments from the country's central bank governor, which were expected to support the hobbled currency, fell short of the mark.

Economists had expected Erdem Basci to step up his rhetoric against the swiftly sliding lira in his speech Tuesday, possibly with signals that the central bank could consider raising benchmark interest rates—a break from the policy so far of selling dollars and raising lending rates.

Instead, Mr. Basci said the central bank "won't step back on interest rates," and that he sees the drop in the lira as temporary. In response, the lira weakened over 1% against both the dollar and euro following the governor's speech. The dollar surged past 2.03 lira for the first time, while the euro rose to a record high of 2.7163 lira.

In an interview with state-run news agency Anadolu Agency, Mr. Basci said the central bank will keep core interest rates at 6.75% until the inflation rate falls to the 6.2% from the current 8.8% by the end of this year.

Mr. Basci, who is under political pressure to keep interest rates low to help fuel growth, said the central bank will fund the market at 7.75% on additional tightening days, but the cost of funding for the banks won't be more expensive than the 7.75% rate. He said the central bank will use foreign-exchange reserves to defend the lira, but won't use interest rates to stem the currency's slide.

Analysts think the central bank doesn't have enough firepower to contain lira weakness, as the national lender has already spent more than $8 billion since June 11 amid a broader emerging-markets selloff, sparked by concerns over the impact of U.S. Federal Reserve plans to start scaling back its bond-buying program by the end of this year.

"If markets are in a risk-off mode there is hardly anything you can do as a central bank…Turkey's central bank could increase their dollar sales again, but the measures are likely to only dampen depreciation not reverse it," said Thu Lan Nguyen, a currencies strategist at Commerzbank. "Everyone knows Turkey's reserves are limited."

http://online.wsj.com/article/SB1000142 ... 29018.html

[Kikapu]

Analysts think the central bank doesn't have enough firepower to contain lira weakness, as the national lender has already spent more than $8 billion since June 11 amid a broader emerging-markets selloff, sparked by concerns over the impact of U.S. Federal Reserve plans to start scaling back its bond-buying program by the end of this year.

The problem in Turkey is, and this has been going on for many years due to high inflation rates in the country, is that for every Dollar the Turkish Central bank sells off now to help lift the TL, the Turkish citizens are buying many more Dollars/Euros with their TL to help fight against depreciation of their own TL against inflation and against direct currency conversion, therefore the TCB is fighting a losing battle if they don't raise the interest rates. In actuality, the TL is now under the mercy of the markets and there isn't much Erdogan can do about it. The dust will settle when the dust will settle, but not before the TL taking it in the shorts more as it has done in the past few weeks.

It use to be a common sight in the past in central Ankara where as soon as someone got paid in TL, they would change their TLs into Dollars from street vendors, because of inflation rates being as high as 80%, just so not to lose too much value in the TL in the following days..

[Lordo]

dont talk rubbish. there is always adjustments on currency, thats how the parasites make a living. sure there will be some pain for the public but there will also be gain from cheaper exports. terkey saw its currency go from 30 to a pound to 3 million to a pound and i dont see any damage done to the economy. in fact the economy is as strong as ever.

[Kikapu]

dont talk rubbish. there is always adjustments on currency, thats how the parasites make a living. sure there will be some pain for the public but there will also be gain from cheaper exports. terkey saw its currency go from 30 to a pound to 3 million to a pound and i dont see any damage done to the economy. in fact the economy is as strong as ever.

Then according to your logic, Exports should be much higher than Imports, but that is not the case, is it?

Turkey has a large trade deficit every month where cost of imports far outweigh income from exports, hence the high CAD which the money needs to come from somewhere, and that somewhere is foreign borrowing, and if the USA is cutting back in buying foreign debts in the emerging markets, guess what will happen. The other problem for Turkey is, the Turks do not save enough, because they don't earn enough income to save, and instead borrow money to live the rich life. Turks can go hungry, but they will always want to impress their neighbours with their new car, holidays they have taken and so on just so to show off.

[Maximus]

dont talk rubbish. there is always adjustments on currency, thats how the parasites make a living. sure there will be some pain for the public but there will also be gain from cheaper exports. terkey saw its currency go from 30 to a pound to 3 million to a pound and i dont see any damage done to the economy. in fact the economy is as strong as ever.

Lordo, this is not entirely correct. A weakening lira is good for exports because the importers can obtain their goods cheaper. For Turkey to sustain let alone gain here, the importers must increase their demand for Turkish goods. If their demand stays the same, they will just be buying turkish goods/services cheaper. When you factor in, as Kikapu has already stated, that Turkey spends more on imports than what she takes from exports, you dont have to be George Soros to know that this is a false economy.

So now, you have a situation where importers can buy Turkish goods/services cheaper but Turkey has to pay even more to import raw materials, goods and services than she was paying before, driving up the cost of living and the cost of production. I dont know what gains you see in this from the Turkish perspective Lordo, but I would not like to work more for the same money and or pay more to maintain my standard of living or do anything stupid which will negatively affect my existing levels of trade.

The main stock exchange has had 30% of its value wiped out since the start of the Gezi protests. Many analysts think that these losses are just the start. Money is on a flight out from Turkey and foreign direct investment is drying up. Any military intervention in Syria will have repercussions on Turkey's economy, which will push the lira even lower, along with the main stock index. Also, the EU-USA exclusive free trade agreement hasn't kicked in yet which is supposed to have negative affects on Turkeys economy. the PKK haven't started fresh campaigns against Turkey yet either.

I dont know how you can say the Turkish economy is as strong as ever when its being flushed down the toilet.

[Lordo]

pop down the high street and see how many terkish products you can buy in average high street. of course the saving on the exports may not be passed on the the consumers but who cares so long as the parasites make more profit then they will push the terkish products harder. talking of collapsing economies you really would do a lot better if you concentrated on how the greek and gc economies will be recovering. unless of course you have given up on them.

[Demonax]

Turkey ‘whistling past a graveyard....’

The Turkish Central Bank has taken a big risk by binding itself to a “no interest rate hiking” policy until the end of the year, according to economic analysts, who are concerned that current fluctuations may be permanent rather than just temporary, as the bank seems to think.

Central Bank Gov. Erdem Başçı has said he does not intend to raise interest rates to save the Turkish Lira from sliding. The lira has hit record lows on concerns about the outlook for further U.S. stimulus and the conflict in neighboring Syria.

The currency, the value of which began plunging at the end of last week with the release of U.S. Federal Reserve minutes backing a tapering plan, hit record lows yesterday, also spurred by worries about the consequences of a possible international intervention in Syria.

The lira fell below 2.07 to the dollar in initial trading, and then rallied slightly to 2.0527. At the close of Aug. 27 it had been 2.0382.

“Turkey’s Central Bank is digging itself into a deeper hole. For a country whose forex reserves barely cover its short-term external debts, this is highly imprudent policymaking,” Nicholas Spiro of Spiro Sovereign Strategy told Reuters.

Başçı’s statement had created an impact on investors that was far from intentional, as the lira continued plunging throughout the interview.

His attitude and remarks, which were clearly aimed at displaying a confident and cool stance regarding to recent fluctuations in the Turkish currency, was apparently perceived in a completely opposite way by most viewers.

“Central Bank Gov. Erdem Başçı was so excited, nervous and anxious while answering questions, his ‘We’re comfortable, we’re very comfortable,’ words seemed like he was whistling past a graveyard,” daily Radikal columnist Uğur Gürses said yesterday.

http://www.hurriyetdailynews.com/centra ... sCatID=344