WEEKLY INSIGHT. Turkey, 'the enemy of my enemy is my friend'

Transcription

1 WEEKLY INSIGHT August 20, 2018 Turkish crisis continue to weigh on markets Global equity markets ended the week broadly lower as enduring concerns over the Turkish currency crisis and whether it may spillover to other emerging market currencies continue to weigh on sentiment. US markets outperformed its global peers with most major indices closing higher for the week led by the defensive sectors. The US S&P 500, Euro Stoxx 50 and Nikkei 225 ended last week +0.59% w/w, % w/w and -0.12% w/w, respectively. The yield on the 10-year Treasury lingered at 2.86% along with a steady Japanese yen trading at against the US dollar on Monday morning. US retails sales rose more than expected in July as tight labor markets and tax cuts were providing households with additional disposable income. Retail sales in July was up 6.4% y/y and grew 0.5% compared to June. The strength of U.S. consumer was further confirmed by Walmart s 2018Q2 earnings report which illustrated the strongest sales growth for the company in over a decade. In addition, US household debt rose 3.5% y/y for 2018Q2 and reached a record of $13.3 trillion due to new mortgage borrowings. Despite the rising total debt, delinquency rate fell to 4.52% in 2018Q2 as students were making more timely payment to repay their loans supported by a robust employment market. In Europe, notwithstanding the weakness in equity markets over the uncertainty in Turkey and trade discussions, Eurozone GDP was revised up to 0.4% from 0.3% for 2018Q2 due to stronger economic growth in Germany for the quarter. According to Nikkei, out of 1,588 listed Japanese companies that released 2018Q2 earnings, 56% reported higher profit with 24% registered record profits. Revenue grew by 8% with net profit margin expanded by 1% to 6.3%, the highest level since fiscal 2008 supported by the manufacturing sector which benefited from the global economic expansion. The U.S. and China announced their upcoming meeting in late August to resume low-level trade discussions before the additional $16 billion in US tariffs on Chinese imports will go into effect. The upcoming discussions would mark the first face-to-face meeting between the two nations in over two months and may lead to progress towards resolving the trade dispute. It is to note that Tencent, China s largest social media and gaming giant, reported its first profit drop in almost 13 years with 2018Q2 earnings coming in below consensus due to lower mobile gaming revenue along with a drop in advertising revenue growth. Looking ahead, central bankers will gather at the Federal Reserve s annual Jackson Hole policy symposium to discuss the recent stress in emerging markets. Fed watchers will also be looking for signals on rates and balance sheet policies. CHART OF THE WEEK Turkey, 'the enemy of my enemy is my friend' Since the US implemented sanctions, the pressure on Turkish assets steps up a notch provoking a sharp sinking of the Levant assets prices. The Turkish lira is down by 34% and 37% respectively against Euro and USD, one year government bonds offer a 27.5% yield in TRY, 6% and 9% respectively in Euro and in USD, the inflation is running at a comfortable 16% and the party is just starting. If Erdogan has been a good cure for Turkey for a while, today the cure became worse than the disease. At the same time, the US sanctions are a double-edged sword. They may favor the Erdogan's grip, making Turkey a martyr and reinforce counter to nature links (i.e. Iran, Russia, China, Qatar). As for a company, an absolute level of debt does not kill. Death occurs when liquidity runs out. Can the country bankrupt? It can yes but we consider such outcome unlikely, at least for now. The gap between foreign exchange reserves and the stock of short-term debt has not been as tight since 2001, amounting to a fragile $5 billion surplus. The recent 15 billion Qatari rescue will bring the surplus to $20 billion, which corresponds to December 2017 level. And the other circumstantial friends did not join the party yet Source: Bloomberg, CBH Turkey Short Term External Debt (In Billion) Turkey International Reserves Net (In Billion) 1

2 EUROPE MSCI EUROPE % -3.9% -2.3% 14 STOXX % -3.7% -2.1% 15 STOXX 50 3' % -6.1% -3.7% 14 CAC 40 5' % -4.9% 0.6% 14 DAX 12' % -6.9% -5.5% 13 FTSE 100 7' % -2.9% -1.7% 13 IBEX 35 9' % -7.8% -6.2% 12 MIB 20' % -14.2% -6.6% 11 PSI 20 5' % -5.1% 1.4% 16 SMI 9' % 0.2% -4.0% 16 MSCI EUROPE 1W 1M 3M YTD Est. P/E Cons. Disc. -1.4% -2.4% -8.5% -1.8% 12 Cons.Staples 0.5% 2.9% 5.2% -0.5% 20 Energy -2.3% -3.5% -8.1% 5.7% 12 Financials -2.3% -1.8% -9.7% -10.9% 11 Health Care -1.1% 1.6% 4.0% 3.5% 17 Industrials -1.1% -1.0% -2.6% -0.8% 17 Inf. Technology -0.1% -2.1% 0.7% 9.2% 24 Materials -2.3% -4.3% -9.4% -5.2% 13 Telecom Serv. -1.6% -0.2% -6.4% -12.8% 14 Utility 0.1% -3.3% -3.6% 0.0% 14 EC CPI YoY NSA Aug F [2.1%] UK GDP YoY SA 2Q P 1.3% 1.3% FR Markit Manufacturing PMI SA Aug P [53.3] IT CPI YoY NSA Jul F 1.9% 1.9% GE Markit Manufacturing PMI SA Aug P [56.9] FR CPI YoY NSA Jul F 2.3% 2.3% EC Consumer Confidence SA Aug A [-0.6] SP CPI YoY NSA Jul F 2.3% 2.3% EC Markit Manufacturing PMI SA Aug P [55.1] PT GDP YoY SWDA 2Q P 0.0% 2.3% GE GDP QoQ SWDA 2Q F [0.5%] GE CPI YoY NSA Jul F 2.0% 2.0% EU GE CH UK 2Y -0.7% -0.1% -0.4% -0.6% 10Y 0.3% -0.2% 0.4% 0.2% 2Y -0.7% 0.0% 0.1% -0.2% 10Y 0.3% 0.2% 3.2% 2.1% 2Y -0.8% 0.0% -0.1% -0.6% 10Y -0.1% 0.2% 2.0% 0.4% 2Y 0.7% 0.0% 0.4% 0.0% 10Y 1.2% 0.1% 2.7% 0.2% Corporates 1-5Y* HY IG 5-10Y* 0.9% -0.1% 0.9% 0.0% 10+Y* Y* 3.7% -0.2% -0.2% -0.4% 5-10Y* Y* * quoted in EUR vs. EUR AUD % 0.4% -1.7% CHF % 3.7% 2.8% GBP % -2.7% -1.0% JPY % 3.4% 7.0% USD % 3.1% 5.0% BRL % -2.5% -11.0% MXN % 7.7% 9.3% NOK % -0.9% 1.8% RUB % -4.3% -9.6% SEK % -1.6% -6.1% ECB % 0.00% 0.00% 0.00% BOE % 0.75% 0.75% 0.50% SNB % -0.75% -0.75% -0.75% Euro GE FR IT ES PT UK CH GDP (% change Y/Y) GDP (% change Q/Q) Inflation rate (Y/Y) Unemployment rate (%) Debt (as % of GDP)

3 NORTH AMERICA MSCI NORTH AM. 2' % 4.4% 6.2% 18 S&P 500 2' % 4.8% 6.6% 18 DOW JONES 25' % 3.9% 3.8% 16 NASDAQ 7' % 5.9% 13.2% 23 TORONTO 16' % 1.1% 0.7% 16 MEXICAN IPC 48' % 5.4% -2.2% 17 MSCI USA 1W 1M 3M YTD Est. P/E Cons. Disc. -0.5% -0.8% 6.6% 13.1% 22 Cons.Staples 3.2% 3.8% 10.3% -4.1% 19 Energy -3.6% -3.7% -7.4% 0.7% 19 Financials 0.7% 2.1% -0.3% 0.5% 13 Health Care 1.6% 4.1% 9.7% 10.1% 17 Industrials 1.4% 3.0% 1.9% 0.8% 18 Inf. Technology -0.2% -0.1% 5.9% 16.0% 19 Materials -0.6% -0.9% -2.7% -3.6% 15 Telecom Serv. 3.5% 5.8% 9.5% -4.5% 11 Utility 2.5% 3.4% 11.3% 3.3% 18 US Leading Index MoM SA Aug [0.6%] ME Industrial Production %Change Jun 0.2% 0.2% CA CPI YoY NSA Aug [3.0%] CA Unemployment Rate SA Jul 5.9% 5.8% US Mortgage Index Weekly %Change Aug 17 [-2.0%] US Mortgage Index Weekly %Change Aug 10 [-3.0%] -2.0% US Initial Jobless Claims SA Aug 18 [212.0K] US Industrial Production MoM SA Jul 0.4% 0.1% US Markit Manufacturing PMI SA Aug P [55.3] US Initial Jobless Claims SA Aug K 212 ME GDP Total YoY NSA 2Q F [2.7%] CA CPI YoY NSA Jul [2.5%] 3.0% US CANADA 1-3Y 2.6% 0.0% - 0.7% - 0.3% - 3-5Y 2.7% 0.0% - 1.3% %- 5-7Y 2.8% -0.1%- 2.0% %- 7-10Y 2.9% -0.1% 2.6% -1.7% 1-3Y 2.1% 0.0% - 0.4% - 0.6% - 3-5Y 2.2% 0.1% - 0.9% - 0.0% - 5-7Y 2.2% 0.2% - 1.4% %- 7-10Y 2.3% 0.3% 2.3% -0.4% Corporates 1-5Y* 3.4% 0.0% - 1.2% - 0.1% Y* 4.0% 0.1% - 2.4% %- 10+Y* 4.6% 0.1% 3.3% -4.8% IG HY 1-5Y* 6.3% 0.0% - 1.8% - 1.7% Y* Y* 7.0% -0.3% 0.6% -0.9% * quoted in USD vs. USD AUD % -2.6% -6.3% CHF % 0.6% -2.2% EUR % -3.0% -4.7% GBP % -5.7% -5.6% JPY % 0.2% 2.0% BRL % -5.4% -15.3% ILS % -1.8% -4.9% MXN % 4.5% 4.1% RUB % -7.4% -14.0% FED % 2.40% 2.65% 1.70% BOC % 1.50% 1.75% 1.15% BdeM % 7.75% 7.80% 7.50% US CA MXN GDP (% change Y/Y) GDP (% change Q/Q) Inflation rate (Y/Y) Unemployment rate (%) Debt (as % of GDP)

4 ASIA MSCI ASIA PACIFIC % -6.9% -6.7% 13 NIKKEI ' % -2.5% -2.2% 16 HANG SENG 27' % -12.1% -9.0% 11 SHANGAI 2' % -15.4% -19.3% 11 SENSEX 37' % 8.0% 11.4% 20 KOSPI 2' % -8.2% -8.9% 9 S&P/ASX 200 6' % 4.0% 4.5% 16 MSCI ASIA-PAC 1W 1M 3M YTD Est. P/E Cons. Disc. -2.1% -3.2% -8.6% -9.6% 13 Cons.Staples -0.7% -4.2% -4.0% -1.2% 22 Energy -2.5% 2.7% -2.8% 2.5% 11 Financials -1.8% 0.5% -7.2% -8.5% 10 Health Care -0.3% -2.2% 0.0% 7.3% 27 Industrials -1.0% 0.2% -6.8% -8.2% 11 Inf. Technology -4.0% -5.7% -10.3% -9.5% 14 Materials -2.7% 0.7% -9.3% -9.7% 11 Telecom Serv. -0.1% 2.7% 2.7% -2.1% 15 Utility -0.7% -1.7% -2.2% 2.7% 14 SK Unemployment Rate SA Aug [3.8%] JN Producer Price Indey YoY NSA Jul 2.9% 3.1% JN Industrial Activity MoM SA Jun [0.1%] HK GDP YoY NSA 2Q 3.9% 3.5% SI CPI YoY NSA Jul [0.6%] IN Industrial Production YoY NSA Jun 5.5% 7.0% JN Nikkei Manufacturing PMI SA Aug P [52.3] JN Industrial Production MoM SA Jun F [-2.1%] -1.8% SI Industrial Production YoY NSA Jul [7.4%] AU Unemployment Rate SA Jul 5.4% 5.3% JN CPI YoY NSA Jul [0.7%] TA GDP YoY NSA 2Q F 3.2% 3.3% JAPAN AUSTRALIA 1-3Y -0.1% 0.0% 0.0% -0.1% 3-5Y -0.1% 0.0% -0.1% -0.1% 5-7Y 0.0% 0.1% -0.1% -0.2% 7-10Y 0.0% 0.1% -0.1% -0.1% 1-3Y 2.0% 0.0% 0.8% 1.5% 3-5Y 2.1% 0.1% 1.7% 2.2% 5-7Y 2.3% 0.2% 2.7% 2.7% 7-10Y 2.5% 0.4% 3.5% 2.6% Corporates 1-5Y* 0.3% 0.0% 0.0% 0.1% IG 5-10Y* Y* * quoted in JPY vs. USD AUD % -2.6% -6.3% HKD % 0.0% -0.5% JPY % 0.2% 2.0% NZD % -3.5% -6.5% SGD % -2.1% -2.6% CNY % -7.4% -5.4% IDR 14' % -3.7% -7.1% INR % -3.5% -9.0% KRW 1' % -3.9% -5.1% MYR % -3.3% -1.4% RBA % 1.50% 1.50% 1.50% BOJ % -0.10% -0.10% 0.00% RBNZ % 1.75% 1.75% 1.75% RBIN % 6.45% 6.50% 6.00% PBOC % 4.35% 4.30% 4.35% CN JP IN AU NZ SK HK SI GDP (% change Y/Y) GDP (% change Q/Q) Inflation rate (Y/Y) Unemployment rate (%) Debt (as % of GDP)

5 EM & OTHER COUNTRIES MSCI EMERGING MKT 1' % -10.6% -11.7% 12 MSCI EM LATAM 2' % -9.2% -11.6% 13 MSCI EAST EUROPE % -9.4% -10.4% 7 MSCI SOUTH AFRICA 1' % -3.4% -10.5% 15 TEL AVIV 25 1' % 4.4% 4.8% 14 RUSSIAN RTS 1' % -10.9% -8.8% 6 FTSE/JSE AFRICA 50' % -2.1% -3.7% 15 IBOVSPA BRAZIL 76' % -9.1% -0.5% 11 MSCI EM 1W 1M 3M YTD Est. P/E Cons. Disc. -5.2% -9.1% -14.2% -21.5% 17 Cons.Staples -1.8% -4.6% -6.5% -11.2% 24 Energy -2.9% 0.1% -8.3% 1.8% 8 Financials -3.3% -2.5% -10.3% -12.3% 9 Health Care -4.5% -8.6% -11.3% -9.5% 28 Industrials -3.3% -2.0% -12.4% -14.9% 12 Inf. Technology -4.5% -7.0% -11.0% -10.1% 14 Materials -3.6% -0.7% -9.9% -7.8% 11 Telecom Serv. -1.3% -2.7% -7.1% -16.2% 15 Utility -3.4% -5.0% -8.8% -8.8% 12 RU Unemployment Rate NSA Aug [4.7%] BR Retail Sales YoY NSA Jun 2.4% 1.5% RU Retail Sales YoY NSA Aug [2.5%] BR Weekly Trade Balance Aug 12 [362.0M] M SA CPI YoY NSA Jul [4.6%] RU Industrial Production YoY NSA Jul 2.6% 3.9% RU Weekly Int Reserves NSA Aug 17 [457.6B] SA Retail Sales YoY NSA Jun 0.0% 0.7% BR CPI MoM NSA Aug [0.6%] RU Weekly Int Reserves NSA Aug 10 [458.0B] 457.6B AR Economic Activity YoY NSA Jun [-5.8%] RU Unemployment Rate NSA Jul 4.7% 4.7% IL RU 2Y 0.4% 0.0% 0.1% -4.4% 10Y 2.0% -0.1% 0.7% -2.8% 2Y 8.0% -0.4% -2.0% -1.4% 10Y 8.8% -2.4% -8.4% -6.8% BZ CL 2Y 8.4% 0.6% 1.1% - 10Y 11.9% 0.1% -11.1% - 2Y 3.7% % -3.1% 10Y 4.6% 0.5% - - vs. USD ARS % -18.6% -37.6% BRL % -5.4% -15.3% CLP % -5.7% -8.2% ILS % -1.8% -4.9% RUB % -7.4% -14.0% SA 2Y 7.7% 0.0% 1.2% 3.5% 10Y 9.0% -0.8% -0.7% 3.0% ZAR % -13.9% -15.4% BOI % 0.10% 0.15% 0.10% BCB % 6.50% 6.70% 6.55% BCCE % 2.55% 2.70% 2.50% CBR % 7.20% 7.10% 7.25% SARB % 6.50% 6.55% 6.50% IL RU SA BZ AR CL GDP (% change Y/Y) GDP (% change Q/Q) Inflation rate (Y/Y) Unemployment rate (%) Debt (as % of GDP)

6 COMMODITIES LAST LAST 6M 1W 3M YTD COMMODITY INDEX % -7.7% -5.5% PRECIOUS METALS 1' % -9.2% -10.6% GOLD ($/oz.) 1' % -8.3% -9.1% SILVER ($/oz.) % -9.9% -12.6% PLATINUM ($/t oz.) % -13.3% -17.9% GOLD $/oz ENERGY % -5.5% 5.5% WTI CRUDE ($/bbl.) % -7.0% 11.6% BRENT CRUDE ($/bbl.) % -8.4% 11.6% NATURAL GAS ($/MMBtu) 3 0.1% 2.4% 5.6% INDUSTRIAL METALS % -14.2% -15.6% STEEL ($/T.) % 2.3% 36.3% ALUMINUM ($/mt) 2' % -12.8% -10.6% COPPER ($/lb.) % -15.6% -21.0% SOFT COMMODITIES % -11.7% -22.9% CORN ($/bu.) % -8.3% -1.4% WHEAT ($/bu.) % 8.4% 20.3% WTI CRUDE OIL $/bbl IMPRINT Publication date : All data as of :

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