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Citi on Turkey's Post-Election Market Outlook

TURKEY
  • Citi Research identified a correlation with TRY performance and Turkey’s CDS spreads - focusing on former CBRT Governor Agbal’s tenure from November 2020 to March 2021. They find the level of 5-year CDS spreads declined by ~250bps in response to policy normalisation actions.
  • They estimate that a similar 250bps drop could lead to an appreciation of TRY by about 12% over one year, if similar macroeconomic policies are implemented.
  • Regarding FX, a removal and/or transition of current regulatory measures could see USDTRY trade higher in the short-term towards the 25.00 range. In the medium-term, consensus projects USDTRY around 21.00 in Q3 and 21.63 in Q4.
  • Citi Equity Research highlight that policy normalisation in 2020-2021 led to a material rally in Turkish equity markets, with BIST100 index rallying as much as +37%.

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