Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Strong Man Strikes Again: Lighting has struck again, not five months since his hiring, Central Bank of Turkey (CBT) Governor Agbal has now been dismissed for raising interest rates. President Erdogan handpicked Sahap Kavcioglu as new CBT Governor. He is the fourth CBT Governor in two years, and a banking professor and newspaper columnist who has argued for lower interest rates, after serving a a lawmaker in Erdogan’s AKP party. We all know what happens when academics are in charge; and*Watch Your Risk: The TRL’s decline is troublesome, and the potential for a TRL gray market would NOT be of surprise at this stage. We continue to worry about counterparty risks should defaults rise. It’s probably not a bad time to start thinking about purchasing CDS protection on single name securities and on the Turkish sovereign.

*Strong Man Strikes Again: Lighting has struck again, not five months since his hiring, Central Bank of Turkey (CBT) Governor Agbal has now been dismissed for raising interest rates. President Erdogan handpicked Sahap Kavcioglu as new CBT Governor. He is the fourth CBT Governor in two years, and a banking professor and newspaper columnist who has argued for lower interest rates, after serving a a lawmaker in Erdogan’s AKP party. We all know what happens when academics are in charge; and*Watch Your Risk: The TRL’s decline is troublesome, and the potential for a TRL gray market would NOT be of surprise at this stage. We continue to worry about counterparty risks should defaults rise. It’s probably not a bad time to start thinking about purchasing CDS protection on single name securities and on the Turkish sovereign.

*NDAA Legislation: The US Congress is set to approve the annual National Defense Authorization Act (NDAA) legislation next week with bi-partisan support. Several provisions have targeted Turkey - only adding to its troubles; and *Halkbank Has A Target On It’s Back: There remain significant risks related to Halkbank’s (HALKB.TI) skirting Iran sanctions. Halkbank being removed from USD clearing system would be a very logical sanction, and could do significant damage to the Turkish financial system given how reliant the system is on USD.

*NDAA Legislation: The US Congress is set to approve the annual National Defense Authorization Act (NDAA) legislation next week with bi-partisan support. Several provisions have targeted Turkey - only adding to its troubles; and *Halkbank Has A Target On It’s Back: There remain significant risks related to Halkbank’s (HALKB.TI) skirting Iran sanctions. Halkbank being removed from USD clearing system would be a very logical sanction, and could do significant damage to the Turkish financial system given how reliant the system is on USD.  

*Strong Man Strikes Again: Central Bank of Turkey (CBT) Governor Murat Uysal has been released from his duties, and Naci Agbal has been appointed as the new CBT governor. President Erdogan abruptly fired former Governor Uysal after just 16 months, after he indicated that interest rates may increase again in 2020; and*Watch Your Risk: The TRY’s decline of 43% YTD is troublesome, and the potential for a TRY gray market would NOT be of surprise at this stage. We continue to worry about counterparty risks should defaults rise. It’s probably not a bad time to start thinking about purchasing CDS protection on single name securities and on the Turkish sovereign.

*Strong Man Strikes Again: Central Bank of Turkey (CBT) Governor Murat Uysal has been released from his duties, and Naci Agbal has been appointed as the new CBT governor. President Erdogan abruptly fired former Governor Uysal after just 16 months, after he indicated that interest rates may increase again in 2020; and*Watch Your Risk: The TRY’s decline of 43% YTD is troublesome, and the potential for a TRY gray market would NOT be of surprise at this stage. We continue to worry about counterparty risks should defaults rise. It’s probably not a bad time to start thinking about purchasing CDS protection on single name securities and on the Turkish sovereign.

*Odd Finance Minister Commentary: A report on Bloomberg, suggests that Finance Minister Albayrak has ruled out capital controls in Turkey. This is strange, as capital controls have already been in place for well over a year given the longer settlement dates, higher taxes, limited liquidity, threats of prison, et al. These reported comments suggest a full blown crisis is a fait accompli;  *Low Rates Destroying TRY: Turkey is a slow moving train wreck thanks largely to the policies of President Erdogan. The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting – against consensus of a 200 bp increase. Despite what were punitive capital controls (in contravention to the Finance Minister’s comments), the Turkish lira (TRY) actually declined 2% on the day the CBT failed to raise rates at its last meeting – now nearing 8.2 TRY/USD and achieving another record low down 40% YTD versus the USD when most other currencies are strengthening versus the USD;  and*Risk Is High For Europe, and an EM Domino Effect Is Real: BBVA (BBVA.SM), BNP Paribas (BNPP.FP), and Unicredit (UCG.IM), and HSBC Holding (5.HK) are most exposed. With Turkish corporates/banking system F/X debt in the USD hundreds of billions, worries over counterparty risks are arising. Investors are likely to continue to take advantage an artificially high TRY by continuing to sell while the getting is still good. Geopolitical risk only adds to our concern.

*Odd Finance Minister Commentary: A report on Bloomberg, suggests that Finance Minister Albayrak has ruled out capital controls in Turkey. This is strange, as capital controls have already been in place for well over a year given the longer settlement dates, higher taxes, limited liquidity, threats of prison, et al. These reported comments suggest a full blown crisis is a fait accompli;  *Low Rates Destroying TRY: Turkey is a slow moving train wreck thanks largely to the policies of President Erdogan. The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting – against consensus of a 200 bp increase. Despite what were punitive capital controls (in contravention to the Finance Minister’s comments), the Turkish lira (TRY) actually declined 2% on the day the CBT failed to raise rates at its last meeting – now nearing 8.2 TRY/USD and achieving another record low down 40% YTD versus the USD when most other currencies are strengthening versus the USD;  and*Risk Is High For Europe, and an EM Domino Effect Is Real: BBVA (BBVA.SM), BNP Paribas (BNPP.FP), and Unicredit (UCG.IM), and HSBC Holding (5.HK) are most exposed. With Turkish corporates/banking system F/X debt in the USD hundreds of billions, worries over counterparty risks are arising. Investors are likely to continue to take advantage an artificially high TRY by continuing to sell while the getting is still good. Geopolitical risk only adds to our concern.

Turkey – Start Worrying About Counterparties

*Train Wreck: The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting last week – against consensus of a 200 bp increase. In our view, low rates are likely to result in modest inflation. Despite what feel like punitive capital controls, the Turkish lira (TRY) actually declined 2% on day – nearing 8 TRY/USD achieving another record low and down 35% YTD versus the USD; *Artificially High Turkish Lira: CBT data exhibits that the easing of trading restrictions resulted in foreign investor selling nearly 70% of their previously held Turkish government bonds and equities YTD. Investors are likely to continue to take advantage of President Erdogan's ineptitude of an artificially high TRY by continuing to sell while the getting is still good; and *Continue Reducing Risk: Turkish banks and the Turkish economy should be sold, and if the former Vice President Joe Biden actually wins the White house this could be the end of the TRY.

*Train Wreck: The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting last week – against consensus of a 200 bp increase. In our view, low rates are likely to result in modest inflation. Despite what feel like punitive capital controls, the Turkish lira (TRY) actually declined 2% on day – nearing 8 TRY/USD achieving another record low and down 35% YTD versus the USD; *Artificially High Turkish Lira: CBT data exhibits that the easing of trading restrictions resulted in foreign investor selling nearly 70% of their previously held Turkish government bonds and equities YTD. Investors are likely to continue to take advantage of President Erdogan's ineptitude of an artificially high TRY by continuing to sell while the getting is still good; and *Continue Reducing Risk: Turkish banks and the Turkish economy should be sold, and if the former Vice President Joe Biden actually wins the White house this could be the end of the TRY.

Turkey

Turkiye Kalkinma Bankasi A.S. provides funding to companies in the manufacturing, tourism, energy and mining sectors.  The Bank offers low-interest medium and long-term loans to undercapitalized companies.  Turkiye Kalkinma finances itself by issuing bonds and borrowing from other financial institutions.

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Turkiye Kalkinma Bankasi As (KLNMA TI)

Turkey - YELP!

TURKEY: Not five months since his hiring, the CBT Governor has been replaced. The TRL’s decline is troublesome, and a TRL gray market would NOT be...

Thomas J. Monaco

Turkey - Add NDAA Sanctions To The List

TURKEY: The US Congress is set to approve the annual NDAA) next week - several provisions target Turkey. There remain significant risks related to...

Thomas J. Monaco

Turkey – Off With His Head…Again

TURKEY: Central Bank of Turkey Has A New Governor As President Erdogan Removes His Previous Hand-picked Successor. Erdogsnomics Are Not Working.

Thomas J. Monaco

Turkey – Start Worrying About Counterparties

TURKEY RISK: Odd Comments From Finance Minister Suggest Lack Of Understanding Of Capital Controls In Place. No Rate Hikes, Weak TRY/USD, And...

Thomas J. Monaco

Turkey – Choo Choo

TURKEY: A Crisis Is Coming As a Result of Strongman President Erdogan's Inability to See The forest From The Trees. Rates Too High, Artificially...

Thomas J. Monaco

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