Cablegate: Istanbul Analysts On Market Developments,

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




E.O. 12958: N/A


1. (u) Summary: Istanbul market analysts were not surprised
at the relatively moderate size of the post-EU decision
rally, because they believe that much of the good news had
already been priced into the markets during the last few
months. They expect, however, that interest in Turkish
financial markets will increase beginning early next year,
as Turkey attracts a broader base of global investors. End

2. (u) Bender Securities' Murat Gulkan told Econ Specialist
that the already upbeat bond market welcomed the Central
Bank's rate cut. He noted that Turkish Lira (TL) bond rates
dropped by close to 2 percentage points in two working days
on Friday and Monday. Murat Cetinkaya, Head of Treasury for
Diler Yatirim Bank, told us that fears of a possible crisis
in Brussels had contributed to lira weakness in recent
weeks. The lira's appreciation on Monday, Cetinkaya
explained, merely brought the rate back to its level from
two weeks ago against the Euro-dollar basket.

3. (u) Both Gulkan and Cetinkaya expect more intensive
foreign investor trading following the Christmas and New
Year holidays. With many investors preparing to close out
their 2004 books, they are likely to wait until January
before taking significant new positions. Cetinkaya said he
believes that most of the dollar supply came from local
banks taking their positions before the foreigners come
back. Gulkan said a big-ticket corporate transaction such
as Telsim (mobile telephone company), Star (media group), or
one of the big banks might also trigger high volume F/X
flows early next year. Looking ahead at the coming year,
Murat Ucer, an analyst for Eurosource who has generally been
a voice of caution, told us that he expects macroeconomic
stability throughout the coming year, although growth may
slow considerably.

4. (u) Comment: Istanbul-based (and some London-based)
financial analysts believe that the December 17 EU decision
will put Turkey on the radar screens of the big global
funds, attracting a broader base of global investors than
has been the case up until now. Equity markets of Turkey's
Eastern European competitors are already expensive, with the
Czech Republic showing a 72 percent increase this year,
Hungary 66 percent, and Poland 25 percent. The EU news,
coupled with the Central Bank's long-awaited decisions to
cut borrowing rates, resume F/X purchase auctions, and adopt
inflation targeting, has left analysts bullish on prospects
for 2005.


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