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Cablegate: Turkey Markets Enjoy a Quiet but Positive Week

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS ANKARA 002524

SIPDIS


SENSITIVE


STATE FOR E, EUR/SE AND EB
TREASURY FOR OASIA - MILLS AND LEICHTER
NSC FOR QUANRUD AND BRYZA


E.O. 12958: N/A
TAGS: EFIN ECON PREL TU
SUBJECT: TURKEY MARKETS ENJOY A QUIET BUT POSITIVE WEEK

1. (U) Turkish markets rose steadily, if not spectacularly,
this week. The lira strengthened from TL 1.65 million/dollar
at the end of last week to TL 1.60 at the close of this
morning's trading session. Meanwhile, yields on the
benchmark 4/28/04 t-bill fell from 64.39 to 57.72 percent,
and the stock market rose about 6.5 percent to 11,229.


2. (SBU) Analysts attributed this week's improvement to a
reduction in anxiety over Iraq -- and reports that Turkey's
crucial tourism industry may therefore rebound quickly --
combined with investors more fully pricing in IMF and U.S.
assistance. Investors remain concerned about the
government's commitment to the reform program, along with its
replacement of key economic technocrats with party loyalists,
but are now less concerned about the government's ability to
roll over its domestic debt in the short-term than they were
3-4 weeks ago.


3. (SBU) Senior government officials are continuing their
positive spin campaign, with Prime Minister Erdogan
announcing today that Turkey's exports rose 34.5 percent
(through April 15) compared to the same period last year, and
might reach as high as $50 billion for the year. Separately,
Finance Minister Unakitan said econoimc indicators suggested
the economy had begun to improve, though he provided no
details. (Note: Treasury U/S Oztrak, who will leave office
today, told us earlier in the week that the economy appeared
to have weakened significantly in the second half of March,
perhaps because of the Iraq war, but that Treasury hoped it
would quickly rebound.)


4. (SBU) Comment: Markets have improved considerably since
their lows on March 24-25 (just before the announcement of
the $1 billion in potential U.S. assistance), when t-bill
rates hit 73.5 percent and the lira was trading at TL 1.75
million/dollar. On the other hand, t-bill rates remain
several percentage points higher than they were during the
post-election rally in November, and in fact are higher than
they were during the April 2002 market rally. The question
remains whether the government can instill enough market
confidence to bring interest rates down further and -- most
importantly -- avoid the mini-shocks that keep sending rates
back up.
PEARSON

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