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Cablegate: Turkish Financial Markets Recover in Post-Holiday

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

021540Z Dec 03

UNCLAS ANKARA 007389

SIPDIS


SENSITIVE


STATE FOR E, EB/IFD, AND EUR/SE
TREASURY FOR OASIA - JLEICHTER AND MMILLS
NSC FOR MBRYZA AND TMCKIBBEN


E.O. 12958: N/A
TAGS: ECON EFIN TU
SUBJECT: TURKISH FINANCIAL MARKETS RECOVER IN POST-HOLIDAY
TRADING


REF: ANKARA 7273


1. (U) Summary: In the first full trading day following the
Istanbul bombings and a week of local holidays, Turkish
financial markets more than recovered, with stocks rising 9.5
percent December 1, the lira strenthening, and interest rates
resuming their downward trend. On December 2, equity markets
rose 1.6 percent, however the picture was more mixed in the
foreign exchange and debt markets. End Summary.


2. (U) In the initial minutes after the second wave of
Istanbul bombings November 20, the IMKB 100 index fell over 7
percent and the stock exchange ceased trading (reftel).
Since it remained closed on Friday, November 21 and the week
of November 24-28 (due to the week-long Bayram holiday), only
on December 1 did the stock exchange reopen and the debt and
foreign exchange markets return to normal trading volumes.
With no further bombings in the interim, and the economic
outlook unchanged with the possible exception of the tourism
and travel sectors, markets seem to have returned to normal.


3. (U) At the opening December 1, markets leaped forward,
wiping out their November 20 loss in morning trading, before
closing up 9.51 percent at 16,007. Bank stocks, which have
been benefiting from favorable earnings announcements in
recent months, led the way, with the leading banks' stocks
increasing between 12 and 14 percent. On Tuesday, the stock
index resumed its forward march, rising 1.6 percent to 16,242.


4. (SBU) The foreign exchange market was similarly bullish on
December 1. Unlike the stock market, the foreign exchange
and government securities markets had been open some of the
days since the bombings, but trading volume was light because
of the holidays. The lira rallied to TL 1,448,500 per dollar
at the close Monday, up from TL1,460,000 at Friday's close,
as compared with TL 1,484,000 after the bombings November
20. There were reports that foreigners--who had pulled out
of lira after the bombings--were now buying lira and were a
significant factor in the rally. On Tuesday, the lira eased
back to TL 1,459,000, but a Central Bank official told econ
specialist that this was largely due to one USD 90 million
foreign exchange purchase by a Turkish company.


5. (U) With inflation numbers due out Wednesday after the
close of business and a heavy calendar of redemptions this
week, there was a more mixed picture in government securities
markets. Interest rates on government securities, which had
increased slightly after the bombings, fell back close to
their pre-attack levels on December 1. On November 20, rates
on the benchmark December 15, 2004 bond had increased from
28.69 percent to 29.07 percent and were at 29.20 at the
November 28 close in thin holiday-week trading. On Monday
the benchmark rate came down to 28.95 but rose to slightly on
Tuesday to 28.98. The uptick in the benchmark's interest
rate contrasts with a rally in Turkish Eurobonds and
successful domestic t-bill auctions on Monday and Tuesday,
which were in line with expectations: Interest rates on
Tuesday's auctions were 27.79 percent on the May 5, 2004
t-bill and 28.91 percent for the January 26, 2005 t-bill.


DEUTSCH

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