HAKAN GULDAG – ALI AGAOGLU
Economist Ali Agaoglu and journalist Hakan Güldağ discussed the impact of the crisis in the Supreme Court on the markets. Describing the Supreme Court’s statement as “a kind of judicial memorandum”, Ali Ağaoğlu said, “It will not benefit us in the long run. It will not make the job of Gaye Erkan and Mehmet Şimşek, who are on a trip to America, any easier.
Guldag: Atatürk says ‘my spiritual heritage is science and reason’. Does the earthquake at the top of the judiciary seem reasonable to you?
Agaoglu: You said earthquake, I’ll take it a notch further. We used to hear memoranda from the military. I’m not a lawyer, but as a person of average intelligence in understanding what I read, the Supreme Court’s statement is a kind of judicial memorandum…
Guldag: This will have political effects. Beyond that, the Minister and the Governor of the Central Bank are on the road again to contact investors. So, will this development make our job easier? No. Does it make it harder? Yes!
Agaoglu: Frontalization of the judiciary will not help us.
Guldag: Just when we thought we were below 3 trillion liras in currency-protected deposits (KKM) and normalization in the bond market was becoming apparent, this conflict was like putting a bullet in our own foot…
Agaoglu: We were already having problems with the rule of law, now we are having problems with implementing the law. I think the Parliament should take serious measures. It will not benefit us in the long run. It will not make the job of Hafize Gaye Erkan and Mehmet Şimşek, who are on a trip to America, any easier.
Güldag: Let’s be frank, foreign investors, whose money we are chasing, are still distrustful of the way things work in Turkey. Will the economic management be able to continue? Will there be another U-turn in policies tomorrow? While these questions are on the agenda, we are also experiencing developments that will raise concerns about the independence and impartiality of the judiciary. I hope that this crisis will result in a reduction of the question marks over the rule of law and a strengthening of the perception that we are a functioning democracy. Don’t ask me if I believe this, there is a need. We cannot afford to be pessimistic!
Agaoglu: I think it will not be easy for foreign investors to come even if you increase interest rates, or they will not come in the amounts we want.
Guldag: The economic administration’s efforts are appreciated, but foreign investors do not seem to have much appetite for buying Turkish assets. However, when the interest rate rose to 32% in the auction held on Tuesday last week, I thought we were reaching levels that could be attractive for foreign investors. The stock market is also fluctuating back and forth.
Agaoglu: The fluctuation does not seem serious to me. Because as we have seen with the crisis in the judiciary, we cannot predict the effects of a structure that can bring serious problems. I am anxious on my behalf. Sometimes you fall and get hurt, but you don’t realize it at first, and then you feel the pain more. A similar situation happened here. The reaction of the market was minimal. However, this is a very important event and it will take time to see the effects.
Guldag: Do you think the stock market has lost its upward dynamics?
Agaoglu: There were two main motivations for the stock market to rise after the election. One was that interest rates would rise and the market would find its own balance. Secondly, with this policy, there would be foreign inflows into the country. We are doing the first one. Mehmet Şimşek is on his own and correct path. The Central Bank too… If they do not compromise, we will understand this in the next monetary policy meeting. At least we will have passed the first stage. The second stage is that the judicial crisis needs to be resolved quickly.
Guldag: What are your expectations for the stock market and exchange rate after the latest developments?
Agaoglu: I do not expect any new records in the stock market this year. Both on the stock market and the exchange rate. It is not easily possible to give any reaction on the bond and especially on the exchange rate side. Because those who had such a concern would be expected to unload their TL assets and buy foreign currency. However, since there are no foreigners in the market, there is no such reaction. Moreover, there is no channel. Swap channels are closed, and inflows are under control. But the lack of reaction does not mean that this is not a serious problem.
Guldag: Deposit interest rates are going up again. Investors are also turning to deposits and bonds. Won’t this hurt the stock market?
Agaoglu: I will say positive. As soon as the policy rate and the deposit rate reach a certain balance, the valuations of the companies in the stock market, especially in the bond market, will be done in a healthy way. Someone will not be able to manipulate some values easily. If you use the value of a company with a 10 percent interest rate as a risk-free rate, the value of the company will soar. Such an interest rate was not real. When it reaches the real level, at least when it converges to the real level, accurate valuations will be possible for healthy price formation. After the correct valuations, the shares that are absurdly priced may fall, but our important companies, especially the banking sector and other holdings, which are the flagship of the stock market, will reach their real values.
Guldag: Of course, in this process, if Turkey gets rid of the perception that it is a country where anything can happen at any time, we will normalize faster.
Dollar closes the year-end below 30 TRY
Guldag: We went above 28.50 in the dollar. Is your year-end expectation below or above 30 TRY?
Agaoglu: I expect below 30 TRY. Since a managed and directed price policy is being followed, we will end the year below 30 and a movement will come after the elections.
