Macro and Politics

* TURKSTAT will release May industrial production (IP) figures today at 10:00 local time. An analysis of the foreign trade data, which provide important signals regarding industrial production, suggests that the trend in intermediate goods imports excluding gold and energy points to a loss of momentum in industrial production in May. In addition, we expect the bridge-day effect associated with the Eid holiday to have exerted downward pressure on industrial production during the month. Accordingly, we expect industrial production to weaken in May. Nevertheless, with the temporary holiday effect set to fade in June and base effects becoming more supportive, we assess that industrial production could return to positive territory in June.

* During the June 26 – July 3 period, foreign investors’ net equity purchases slowed markedly to USD11.5mn from previous week’s USD203.3mn, while the bond market (excluding repo transactions) recorded a robust net foreign inflow of USD572mn. Accordingly, foreigners’ share in the total bond stock increased from 6.1% to 6.4%, reaching its highest level since the week of March 19. Moreover, during the same period, residents’ FX deposits (excluding gold, adjusted for the EUR/USD parity effect) declined by USD3.7bn, During the same period, residents’ FX deposits (excluding gold, adjusted for the EUR/USD parity effect) declined by USD3.7bn, while their total FX deposits (including gold and adjusted for the price effect) decreased by USD3.3bn. In terms of official reserves, the CBT’s gross FX reserves increased by USD10.5bn to USD159.7bn during the June 26 – July 3 period, while net FX reserves rose by USD9.6bn to USD54.9bn. Over the same period, the swap stock increased by USD383mn to USD15bn, while net reserves excluding swaps improved by USD9.3bn, reaching USD39.9bn.