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Last Updated: 10/02/2009
American banks continue to disclose bigger losses than expectations while macroeconomic data sending the economic recession signal. Unemployment rate maintains its rising trend and housing market, causing global financial crisis, shows no recovery. Obama government tries to save the economy with the huge rescue package and guarantees to the toxic assets of the banking system. Markets are squezzing between the bearish mood of the weak macroeconomic data and bullish mood of huge rescue package.
In domestic market, industrial production contracted 17.6% yoy in December and capacity usage fell to 63.8% in January, both even worse than the 2001 contraction. Uncertainty remains on whether IMF stand-by deal will be signed or not. Weak economic data along with the continued improvement in inflation expectations obviously increases the chances of a more front-loaded easing.
We repeat our bullish view on goverment bonds having the downside potential in rates. However, there is no sign of equity market rally, although we think that the Turkish equities are under-valued. Also we express our view that any negative news on IMF deal may exacerbate concerns over financing of current account deficit and put pressure on Turkish Lira.
