What matters on Friday, September 2

The Central Bank has further strengthened liraization steps as the demand for foreign exchange (FX) continues and FX accounts maintains its dominance in total deposit accounts despite the FX-protected TRY deposit accounts. The bank, which previously increased its target value for TRY conversion and included legal persons in the target, now has decided to get a commission from the banks that have higher FX deposits than TRY deposits. The Central Bank will annually get a 3% commission from FX reserves of banks if real persons and legal persons’ TRY deposits held by them remain below 50%, according to the decision.

Industrialists said orders received before the electricity and natural gas prices used by the manufacturing sector were increased by 50.8% and 49.5%, respectively, at once, will be recorded by companies as a loss, as the price hikes are too sharp. Industrialists, who also emphasized that they have trouble in pricing after the annual hike in energy costs approached 500%, stated that their competitive power will further decrease. The sharp FX rate hike creates a higher cost increase compared to rivals, according to sector representatives. They also said a path has been entered that jobs will be cut, and production will be halted with the stagnation to happen in the domestic market.

Borsa Istanbul’s BIST 100 Index showed the highest performance in 13 years with a 23.3% hike in August. The index ended last month with a 20.4% premium on a USD basis. The BIST 100 index, which has differentiated positively from the global markets where concerns over the recession and high inflation increased, hit successive records, especially with the support of the banking stocks last month. The banking index jumped 51.8% in August.

Russia is considering a plan to buy USD 70bn in CNY and other “friendly” currencies this year to slow the RUB’s surge, according to Bloomberg News. The plan was initially supported at a special “strategic” planning meeting of top government and central bank officials including Governor Elvira Nabiullina on August 30, according to people familiar with the deliberations who spoke on condition of anonymity to discuss matters that aren’t public. Even buying the currencies of “friendly” countries is problematic according to the report, which was submitted at the meeting and obtained by Bloomberg. It said that selling CNY holdings “requires a separate agreement with China, which will be very hard to get in a crisis.” Other currencies like the AED are subject to “high political risks” because those governments might shift their policies, while the TRY faces major devaluation risks, the document said.


The Trade Ministry will announce the temporary foreign trade data for August.


>>The Istanbul Chamber of Industry (ISO) Turkey Manufacturing PMI (Purchasing Managers Index) rose from 46.9 to 47.4 month-over-month in August. Although the index inched up last month, it remained below the threshold level of 50.0 for the sixth consecutive month.

>> The Central Bank’s international net reserves dropped by USD 1.26bn from USD 13.88bn to USD 12.62bn in the week ending on August 26, compared to the previous week. The bank’s gross FX reserves declined from USD 71.5bn to USD 70.8bn in the same period.

>> The share of foreign investors in Borsa Istanbul rose from 32.71% to 34.61% in August, compared to the previous month, according to daily DUNYA.

>> The total amount in FX-protected TRY deposit accounts (KKM) has reached TRY 1.24tr as of August 19, according to the Banking Regulation and Supervision Agency (BDDK). The share of KKM in total deposits rose to 16% in the same period. The Central Bank made no statement about the cost of KKM. Although the Treasury and Finance Ministry allocated TRY 40bn with an additional budget to meet the KKM cost, this amount has been exceeded.

>> The Istanbul Wage Earners Cost of Living Index (WECLI), which indicates the movement of retail prices in Istanbul, jumped 99.9% in August, compared to the same month last year, hitting a 24-year high, according to the Istanbul Chamber of Commerce (ITO).  The Wholesale Price Index, which reflects wholesale prices in the city, climbed by 98.09 % in the same period. The Istanbul WECLI rose by 2.89%, and the Wholesale Price Index increased by 6.90% in August, month over month.

>> The U.S.-based investment bank Goldman Sachs upgraded Turkey’s GDP (Gross Domestic Product) growth forecast from 3.5% to 5.5% for 2022 and increased the country’s current account deficit projection from USD 36bn to USD 45bn for this year.

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